I may well bring up the points that the noble Earl intended to make, so I will hope to cover some of his anxieties. To continue, I am grateful to the Minister and his team for the very constructive way in which his department has engaged with Peers on these regulations.
By and large, the Explanatory Memorandums have commonality across the regulations, as the bundle today transfers the functions necessary to transfer the complexities of the CAP schemes, including the basic payment scheme, to the UK on the UK’s exit from the EU. Last week, the Committee examined and approved
the statutory instruments pertinent to rural development that are also managed under the subject of this week’s regulations.
I certainly approve of the instruments, but it would be useful to have the Minister’s clarification and confirmation of several aspects of their provisions and some amendments give rise to the need for further explanation. I am very clear about the CAP schemes. I apologise if some of my queries go beyond the technicalities of the regulations, but to a large extent they expand on the queries already raised by other noble Lords.
The regulations have been introduced to maintain continuity and consistency and bring about a smooth transition to the UK’s new regime proposed in the forthcoming Agriculture Bill. Can the Minister confirm that the instruments will become operable in the event of no deal, whenever that might be, and, under the scenario that the UK leaves with any deal at the end of the transition period up to the end of the present Parliament, which is still expected to be in 2022, when the Agriculture Bill may be implemented?
In so far as there might be an extension of the date under Article 50, will this result in a commensurate end date for the transition period under the outcome with a deal? Would that then necessarily shorten the time when these regulations would operate before the new Agriculture Bill provisions became operable at the end of the Parliament? I assume that, because of these complexities, no end date can be written into these regulations. As further payments for the EU will continue under the extension of Article 50, will this be relevant to the £39 billion due from the UK to the EU on exit?
Turning to what the regulations mean for present practice, can the Minister confirm certain features? First, and very importantly—this might be the point that the noble Earl, Lord Erroll, wished to bring up—is the Rural Payments Agency capable of administering the added totality of these schemes, bearing in mind two aspects? First, it manages the schemes already from a UK perspective so, prima facie, it should. However, secondly, whenever there have been any fresh iterations of CAP regimes, the RPA has traditionally struggled to cope, with resulting delays and confusions. It is struggling now to incorporate the environmental schemes transferred to it last year. What can the Minister say to reduce anxiety over the management of these changes?
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Are there any possible contradictions regarding the various closure dates and schemes and new applications? In paragraph 2.2 of the EM on the agriculture and horticulture development board regulations, contradictions could arise which could transfer through to Pillar 2 operations, in that environmental and countryside stewardship schemes may continue until their relevant scheme end date, which may differ from the end date of 2020 under the rural development schemes. Is it correct that the features of new applications could continue under one scheme, but not another? Is this pertinent during any transition period when the present EU regime would still continue?
Will the Minister confirm that modulation will continue at the same rate under these provisions until measures under the Agriculture Bill take effect? Does this also
apply to cross-compliance, the three-crop rule and the various other features of the present CAP? Could any features change during this period? Under the CMO regulations, will the maintenance of intervention and stock management continue? The Minister will understand that purchases and releases of stock are very relevant to market prices and maintain stability within various thresholds.
There are also continuity queries under the present iteration of the CAP scheme in relation to the devolved Administrations. Scotland was originally concerned that its farmers were disadvantaged vis-à-vis English farmers, Could any contradictions arise under paragraph 7.8 of the Explanatory Memorandum for the supplementary provisions regulations, or under paragraph 6.3 of the Explanatory Memorandum for the legislative function regulations? There are some Pillar 1 discrepancies in their implementation. It is noted that the Secretary of State can exercise functions on behalf of Scotland and Northern Ireland only with their consent, and on behalf of Wales with certain restrictions and with its consent. Presumably, the complicated arrangements which presently exist will continue.
Turning now to the policy changes, the noble Lord, Lord Beith, mentioned the changes to the RML. I thank the Minister for his introduction regarding the changes made and the application of this levy. Bearing this in mind, to the extent that the AHDB loses funds, will the Treasury make up that shortfall?
Turning now to some of the other amendments that change present policies, I mention disallowance. The audit function explanations in Annexe 2 to the Explanatory Memorandum on the financing, management and monitoring regulations talk about replacing the European Commission and make clear that the UK’s regulatory regime will become operable. Ultimately, how does this affect the UK Treasury? Will applicants be anxious that they might become subject to unknown clawbacks at some future date, or does it merely suggest that there might be minor amendments to plug any discrepancies that could arise?
It is planned to remove the crisis reserve. As this is part of the CMO regime, will the UK now not continue to finance any central reserves in case of emergencies, and if not, why not? Annexe 2 puts the total funds that are put into reserve each year at £38 million, but states that they have never been used, so far. Are the Government forecasting that there will be no climate change emergency or any other contingency that would make a fund prudent?
I turn now to the state aid provisions, and note, as did the Minister, that they were extensively discussed in a Department for Business, Energy and Industrial Strategy debate on 14 March. They largely transfer the functions of the European Commission to the CMA. I begin by asking the Minister to explain the possible discontinuity in understanding how state aid provisions will operate. In the existing regime, they exist between member states to alleviate possible anti-competitive behaviour between member states. How will this operate in relation to its repatriation to the UK? Is it to monitor fair competition between the UK regions of England, Scotland, Wales and Northern Ireland, or will it operate in some other way? Will the devolved
Administrations have their own rules? If not, what anti-competitive behaviour is being undertaken, and against whom? Do the regulations take effect on exit day or at the end of the transition period? Previously, an annual state aid budget appropriate to the UK was set. Will this continue at the present level as the regime is repatriated?
Is it intended to set a budget figure between the devolved Administrations? Bearing in mind that the UK’s present spend is at 0.36% of GDP, lower than the EU average of 0.69%, is there room for UK schemes to expand—if that is the right way to understand the exemptions from state aid? This means that to be up to parity with France, for example, the UK could spend £6 billion more than it does at present. How would this application of state aid apply in Ireland? Would it revert back into WTO territory between Northern Ireland and Eire? There are also significant penalties for breach of the regulations. How will this operate in a UK context under the powers of the CMA? What role will Parliament play in any of these provisions? I mention the state aid complexities at great length because they are particularly pertinent to the agricultural sector, incorporating important features, such as product designations by geographical indicators.
Finally, I echo the remarks of the noble Baroness, Lady Byford. The regulations are very pertinent to agriculture, the wider rural economy and the food supply chain. The Minister will appreciate that there is great anxiety regarding the present lack of clarity on the outcomes and negotiations with the EU, and the level of tariffs that will apply under the various scenarios.
I appreciate that the Minister’s department was not the lead department regarding the announcement last week of temporary tariffs that will come into force in the event of a no deal. However—perhaps this is for another day—further dialogue with the Minister and his department would be very welcome as it is his department that will have to manage the dialogue with the agricultural industry, and extensive consultation would be appreciated across the industry.