National Trust Written Evidence Submission to the Welsh Affairs Committee Inquiry: Agriculture in Wales post Brexit May 2017 Introduction

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1 National Trust Written Evidence Submission to the Welsh Affairs Committee Inquiry: Agriculture in Wales post Brexit May 2017 Introduction The National Trust is Europe s largest conservation charity with 4.8 million members and is the UK s largest private landowner and farmer with some 250,000 hectares of land and 1,800 agricultural tenancies. The National Trust has the single largest interest in and responsibility for looking after the farmed landscape of Wales. The Trust owns over 50,000 hectares of land in Wales which we manage for the benefit of the nation. The majority of this land is farmed, either by the Trust, by one of over 240 tenants or in agreement with common land graziers. Our aim is to support farmers to manage our land to high environmental standards, and to ensure that the full range of functions provided by land in our care is realised. This includes production of food, timber, renewable energy, water catchment and flood control, carbon storage, biodiversity, protection of landscape and cultural significance, and provision of opportunities for recreation and inspiration. Farm rents form a greater proportion of the Trust s income in Wales than in England and Northern Ireland, and the largest National Trust agricultural estate is in Wales, at Ysbyty Ifan. Under our new strategy, we are committed to developing innovative ways of managing land on a scale which are good for farmers, the economy and the environment the overall goal being to secure the recovery of nature. Brexit poses both a challenge to an opportunity for that vision. It for this reason that we are making a written submission to this inquiry. We believe farming and land management can become more sustainable and remain productive whilst restoring nature and providing wider public benefits. Based on growing evidence to support investment in nature, any post-brexit strategies and economic models for farming and land management must therefore recognise the vital and integral role played by natural resources. Government cannot be expected to pay for everything; the private sector depends on public goods provided through sustainable land management and must contribute to their maintenance. Future investment in green infrastructure and wildlife-friendly farming will need to be supported by a combination of public subsidy and private capital, making it profitable and rewarding to manage land sustainably for both private and public benefit. 1

2 1. As the UK leaves the European Union, where should the responsibility for agricultural policy in Wales lie? We believe that, as an area which is currently devolved, responsibility for agricultural and land management policy in Wales should remain with the Welsh Government post-brexit. Welsh agriculture operates in a distinct environment to that of the rest of the UK. A report by the National Assembly for Wales Research Service 1 described Wales as being characterised by upland and mountainous topography and is subject to a wetter climate than much of the rest of the UK. As a result a large proportion of utilised land is considered as less favourable areas, land which is heavily focused on the grazing of livestock, specifically sheep. We have comparatively small farm holdings that make relatively modest incomes. The dairy industry and arable farming are restricted to the more productive areas. These are predominantly in lowland areas in the southeast, northeast, coastal regions and river valleys. The relatively low levels of intensive farming results in smaller incomes relative to similar sized farms in England. For this reason the needs of Welsh farmers differ from those of the wider UK and benefit from distinctly Welsh agricultural policy approaches which can respond to their unique issues and challenges. In addition there is a need to appreciate that agricultural policy is inextricably linked to wider environmental and land use policy, which are also devolved areas. Over the last legislative period the Welsh Government has been supported by the sector in creating a new legislative framework for the holistic management of our Natural Resources through the Environment (Wales) Act. We believe that in order to achieve the aims of this Act and the sustainable management of land in Wales we need to maintain a joined up approach where agricultural and environmental policy remain fully within the competency of the Welsh Government. A Welsh agricultural and land management policy should not just be something for the Welsh Government at a national level which individual farms then respond to. The natural environment does not respect farm boundaries and needs joined up habitats on a landscape or catchment scale, not overarching subsidies which are then implemented on a farm-by-farm basis. In the future, outcome setting and policy delivery should start at the landscape or catchment level, with farmers, landowners and conservation organisations working collaboratively to help set plans based on clear, long-term outcomes. Decisions on what outcomes to fund should be taken at a 1 2

3 level closer to farmers and ecosystems but with a line of sight to central government (drawing on international conventions that the UK has signed up to) down to the local level. This approach is fully in line with the approach already being taken by Welsh Government in Natural Resources Management Planning and the creation of Area Statements to deliver the Natural Resources Policy. We believe that in time Area Statements can provide a mechanism for collaborative prioritisation at a local level and bring stakeholders together to deliver those priorities. We do recognise however, that there are benefits to taking a joined up approach across the UK. Maintaining a set of common principles and ambitions or an agreed framework across all four nations is highly desirable, to avoid a race to the bottom and to address cross-border issues. Landscapes, rivers and ecosystems do not recognise political borders. However, given that agriculture is a devolved issue such a common principles/framework should not be set at Westminster and imposed on devolved nations but agreed jointly by all four countries. The framework should set standards, but should be sufficiently flexible to allow for implementation at devolved level in ways which reflect national differences as already described. 2. How should agricultural funding be allocated in Wales post-brexit? Agricultural funding of the future should, in our view, be allocated according to the following two principles; 1. Public funding should deliver public goods- with farmers delivering the most receiving the most Our starting point for the future allocation of agricultural funding in Wales is that, like all tax payers money, there should be an expectation that public funding needs to deliver public goods. The agricultural sector is associated with a wide array of public goods which are increasingly valued by society. This includes heritage and cultural landscapes, diverse wildlife, clean and plentiful supplies of water, healthy soils, carbon sequestration, access and recreation, clean air, stable climate and flood risk mitigation. These are a mix of social and environmental goods, which isn t unsurprising given the fundamental involvement of land and our connection to it. But farming also plays an important role in delivering broader social public goods from vibrant rural economies to animal welfare and of course food security and renewable energy. The majority of CAP funding currently goes on direct payments based on farm size. This basic income support payment should be gradually removed and repurposed as part of a transition to a new public goods for public money model, with an increasing role to be played by a range of agri-environment type schemes and, ultimately, the 3

4 growth of new markets/private investment. A certain level of public funding will continue to be required to ensure governments and taxpayers retain a stake in any new system beyond simply regulation. This would pay for the delivery of public goods for which a market does not exist. Farmers that provide the most public benefit (or best outcomes for society) should receive the most from any public funding streams. We would argue, with limited resources and the goal of securing better taxpayer value, that any public funding would be best targeted at improving and enhancing the long-term health of the natural environment, promoting more innovative and sustainable ways to increase productivity and diversify income, whilst ensuring farmers get paid a fair price for their products. This would open up the opportunity to focus more public support on the key environmental and social public goods that are in undersupply from agriculture relative to the scale of societal demand - but which also have a twin purpose in the part they play in securing a more sustainable sector and vibrant countryside. We believe a system is needed which optimises the use of public money in delivering public benefits, aligning the needs of farmers and need for food security with good social and environmental outcomes: the more a farmer delivers for society, the more support they get. And a new policy framework should help with the introduction of new market-based mechanisms to complement and enhance the impact of such public funding. However, this won t happen overnight; it will take time to establish and scale up these complementary approaches to delivering more functional public goods like flood risk mitigation and carbon sequestration. 2. All funding should drive better outcomes for nature The State of Nature Report 2016 has shown that UK species are in crisis 2, this is a crisis for the ecosystems on which we all depend. Currently, only 30% of the direct payment is conditional on meeting green farming standards with penalties for non-compliance only going as far as losing that sum. Nature and natural systems should be at the heart of any system of support for farming with farmers seen as partners in creating and delivering the solution to the crisis in the state of nature. Regulations should be clearly related to and underpin outcomes, with 100% of any public payment being conditional on meeting higher but more manageable baseline standards for wildlife, soil and water and so on. Farmers should be able to make a living without degrading the environment or compromising 2 4

5 the ability of future generations to farm (promoting the good stewardship and enhancement of the countryside). Nature does not respect farm boundaries and needs joined up habitats on a landscape scale, not overarching subsidies which are then implemented on a farmby-farm basis. Farmers also need long-term certainty to plan and build the long-term resilience of the natural assets on which farming is built. And nature itself does not respond to political spending cycles but needs long-term funding to achieve outcomes. In the future, we should start at the landscape level, with farmers and landowners working collaboratively to help set plans based on clear, long-term outcomes. Public funding should help create ways of farming that benefit nature and help develop new markets to reward farmers for providing services like storing carbon, preventing floods and promoting biodiversity. The new system should play an important role in the realisation of these new market opportunities hand-in-hand with public funding. Putting nature at the heart of the system will not only enhance the natural assets that underpin food production but open farming to new funding opportunities. We need to create the enabling framework to make that a success, thereby reducing the reliance on public funding. Together with our partners 3 and land management that: we believe that Wales needs an approach to farming Restores and protects the soil, air, water and biodiversity (wildlife and habitats) that society as well as rural businesses depend on and value; Produces sustainable and optimal amounts of safe, healthy food and timber; Provides a diverse range of sustainable products that generate income and employment for rural businesses and contributes to a diverse rural economy; Supports vibrant rural communities; Fashions landscapes socially valued for their distinctive natural, cultural and heritage characters; Reduces risks from the impacts of climate change; and is Globally responsible and makes a positive contribution to global well-being. Therefore we consider that a replacement for the CAP should be founded on the following principles: 1. To support sustainable land management, which maintains and enhances biodiversity and the resilience of ecosystems and the benefits they provide to improve the social, economic, environmental and cultural well-being of Wales. 3 RSPB, WWF, Soil Association, Salmon and Trout Conservation, CPRW, Buglife, Butterfly Conservation, Amphibian and Reptile Conservation, Confor, WTW, Coed Cadw and Snowdonia Society. 5

6 2. To deliver value for all public money in the ways sustainable land management is implemented and in the benefits it delivers to wider society. 3. To transition toward new arrangements at a pace that allows time for land managers to adapt, and for new policies to be piloted. 4. To engage with wider society to help people make choices that recognises and reward sustainability as the norm in the way they live. With regard to how any new agricultural funding system would look on the ground, we believe it should; Not rely on past models, but should learn from best practice Be tailored to sites/areas and shaped by local stakeholders Focus on results- payment for outcomes not outputs Encourage or allow for collaboration farmer to farmer, farmer to agency Provide farmers with viable levels of support for delivery of public goods and services. Be informed by and grow understanding within the farming community, most likely through a case officer model This approach will foster the development of progressive and innovative land management, providing farmers and land managers with the certainty to engage in sustainable production. It will ensure public money is focused on supporting resilient rural businesses capable of meeting diverse environmental challenges such as the restoration of habitats, sequestration and storage of atmospheric carbon and the natural management of flood risk and drinking water and in doing so enable Wales to meet international sustainable development, environmental and climate obligations. It will encourage and facilitate partnership working to help build markets for sustainably produced goods. It will seek to improve the value of existing commodities such as food and timber and develop new markets or provide public money for goods and services for which farmers and land managers currently receive little or no economic benefit for maintaining such as natural resources, species and habitats and landscapes. We are clear that we cannot move from one funding system to another overnight. A realistic transition period will be vital and particularly important for the most economically vulnerable, such as those in our extensive livestock sector, who are often farming in marginal areas but which are of high environmental, landscape and nature value. 6

7 3. How should European legislation relating to agriculture be transposed into UK law under the Great Repeal Bill? Which elements should be repealed, amended, or devolved? The Repeal Bill will convert the acquis into UK law at the moment the UK leaves the EU. The Bill will allow Ministers to amend the body of law that is converted via secondary legislation. The Bill will also allow for UK courts to refer to EU treaties and to EU case law for EU derived legislation after Brexit. This should also mean they will refer to the principles that inform EU law, such as the polluter pays and precautionary principles. In addition to legislative considerations in the absence of the European Commission and the European Court of Justice, it is not clear how environmental standards will be upheld post-brexit. In particular, it is not clear what governance arrangements will be put in place to replace the loss of the necessary oversight, accountability, and enforcement functions currently carried out by the EU institutions. Given the proven effectiveness of these Directives where properly implemented, a priority for the UK moving forward should be to effectively retain these high standards of legislative protection for nature in domestic law post-brexit. This will be vital in order to ensure the conservation of our shared natural heritage for future generations and to effectively deliver on our remaining commitments under international agreements such the Convention on Biological Diversity, the Bern and Bonn Conventions, the Ramsar Convention, the Ospar Convention, the Aarhus Convention and the UN Framework Convention on Climate Change. The Brexit White Paper 4 also says that new domestic legislation on the environment will be introduced to move to outcome driven legal frameworks after Brexit. This new legislation could then remove the link to EU case law and to principles like polluter pays and precautionary principle. However, such new domestic legislation should be made on country be country basis. Once this UK level transposition has taken place the assumption should be that any powers repatriated from Europe relating to matters which are currently devolved should be passed to devolved administrations to avoid unintentional roll back of devolution. And we should begin the process of replacing EU institutions and governance arrangements with Welsh equivalents. Natural environment concerns are cross border by nature and so there are clear advantages to seeking to maintain agreed minimum common environmental standards and approaches across England, Scotland, Wales and Northern Ireland, ideally with the freedom for any of the nations to take a more ambitious approach if they so choose

8 From a practical perspective, a degree of alignment will also be required to maintain the UK s own internal market and to enable the UK Government to effectively negotiate international trade agreements. 4. What are the challenges facing agricultural trade in Wales when the UK leaves the European Union? How should the level of trade and export of Welsh food and drink be protected and maintained? Challenges for agricultural trade post-brexit include; 1. Loss of the single market for agricultural exports Wales is greatly reliant on export to the EU. In % of 12.3 billion goods exported from Wales went to the EU. This reliance is even greater when it comes to agricultural products, when it comes to meat exported from Wales, in 2016, 92.7% was accounted for by export to the EU. 2. Loss of the Common Agricultural Policy Agricultural trade however is also impacted by the ongoing viability of the business producing those products. Currently Wales is a recipient of 274 million each year in direct subsidies under CAP. The Farm Business Survey 5 has shown that in a postsubsidy world, for all bar the dairy industry (figures are before the current price slump) there is insufficient profit to pay rent and finance, with hill farms make a loss even before such outputs. Change to this subsidy regime has the potential to shock farm businesses even with the retention of market opportunities. 3. Uncertainty Uncertainty created by the above factors and the consequent inability to plan long term poses a threat in itself. Where there is a possibility of distinct change in business plan from intensification to abandonment investment is likely to be withheld. While the challenges are clear to us the possible scenarios and the risks which they present are still yet to be fully modelled and understood. We could see extremes of abandonment of land in uplands to intensification in the undesignated parts of the lowlands with subsequent impacts for our natural environment, landscapes, cultural heritage and critically, rural communities. The current level of trade and export of Welsh food and drink can best be protected and maintained by bolstering the status quo. Recommendations of reports such as the recent Climate Change, Energy and Rural Affairs Committee Inquiry into the future of land management in Wales 6 reflect this view, recommending; 5 Statistical results from the Farm Business Survey (FBS) in Wales are produced and published annually by IBERS, on behalf of the Welsh Government. The survey incorporates data from a representative sample of 600 farms in Wales

9 Recommendation 1. The UK Government should seek tariff and quota-free access to the EU Single Market for Welsh agricultural and food products. Recommendation 3. The UK Government must safeguard the interests of Welsh lamb producers and, at the earliest opportunity, provide clarity on its negotiating strategy with regards to the future New Zealand lamb quota for the UK. Recommendation 4. The Welsh Government must work with relevant UK Government Departments to significantly increase its trade efforts internationally to develop new, and strengthen existing, export markets for Welsh lamb. Recommendation 5. Hybu Cig Cymru must strengthen its marketing of Welsh lamb across domestic and international markets in order to assist producers to meet the challenges of leaving the EU. A refreshed marketing strategy for dealing with these issues should be prepared within the next 12 months. The strategy must properly address the needs of upland hill farmers. We would agree that these measures would avoid a sudden loss of market for agricultural products with consequential negative effects for Wales. However, we are aware that the status quo is an unlikely outcome, if not in trade then in the flow of public money into agricultural subsidies beyond A better economic future will undoubtedly depend on developing more diverse revenue streams and skills within upland farming, alongside producing high quality food. For this reason as well as looking at maintaining trade we should be taking steps increase resilience. Measures could include; 1. Investment in R and D and knowledge transfer to support sustainable agricultural use and regeneration of natural resources 2. Upskilling in core business skills required to adapt to changing market conditions and maximise margins by controlling costs and minimising waste 3. Diversification of Products Welsh Beef Welsh Beef and Lamb brands have significant UK and international value and should be secured. We believe that there is scope to expand the productions of welsh beef through mixed grazing regimes, a model which has proven its value for both nature 9

10 and profitability in the Yorkshire Dales. We have many native breeds that are suited to low input, high nature value pasture which, if support were available for the infrastructure needed to manage the environmental risks from wintering cattle, could deliver diversification for upland farms. The recommendation made by HCC in their 2014 report, A Review of the Beef Sector in Wales 7 further explore the value of this in the context of upland farms. Tourism The UK scores badly in terms of perceptions of the attractiveness of its countryside for international visitors, compared to its cities and heritage 8. To some extent this is made up for by domestic visitors, but their spending is mainly based on day visits, limiting some of the potential for tourism businesses. We will continue to work with Visit Wales to market Wales as a world leading outdoor destination which offers both the experiences people want and the facilities that they expect. There is much that can be done to market Britain s countryside internationally and domestically to rejuvenate rural economies and provide new sources of income for farmers. A more localised agricultural policy could help on this, which could better link up catchments and landscapes with local authorities and local tourist bodies. The Swiss model of support for funding may also be relevant in this instance, with both national and local funding helping ensure positive environmental benefits which also support Switzerland s tourist industry. 4. Creating Markets for Public Goods. Environmental externalities continue to be unpriced in the market alongside environmental public benefits. Facilitating markets for environmental goods could therefore help diversify farmers income, increasing resilience to market fluctuations and incentivising long-term investment in nature. There is particular potential for functioning markets based on private investment in environmental restoration that delivers tangible benefits for individual businesses. For example, power network operators investing in upstream land to reduce the costs of flood protection, or food businesses investing in soil restoration on the farms in their supply chains. There are already some small-scale examples in place and the National Trust s work on Natural Infrastructure Schemes (starting with markets for flood alleviation and

11 water quality) will be looking at how these types of approach can be scaled-up (see What might be required to help move this forward: Introducing quantifiable long-term objectives for environmental restoration will facilitate market creation, by driving up demand for resource efficient processes, rewarding investment into natural systems, and penalising or prohibiting practices which degrade the natural environment; On the supply side, land managers need confidence that investments in nature will be recognised, through long-term contracts and markets; On the demand side, potential buyers such as developers, utilities, local authorities need confidence in the product they are buying. The Welsh Government can address these needs and facilitate market development by: Removing policy/regulatory barriers and providing the derogations and licences required to trade. For example, ensuring that the Reservoirs Act 1975 does not inhibit use of natural flood management practices on farmland; Increasing research and development grants to, for example, fill-in gaps in knowledge regarding the effectiveness of natural flood management methods at catchment scale; Reforming agricultural subsidies to ensure that public money for food production does not crowd out private money for environmental services; Making available seed funding to support development of new institutions and payment mechanisms, for example development grants to fund up-front costs of land management consortia selling ecosystem services from land under their control; Introducing incentives to support private investment into natural capital; for example, Natural Capital Allowances, based on an extension of the existing capital allowances scheme, that are available to businesses at all levels of supply chains, not just land managers; Use of smart regulation to, for example, establish: units of measurement; trading periods; certification; responsibilities on polluters that can help create demand. These markets could complement a future post-cap public funding system or natural infrastructure investment programme, helping deliver public benefits and environmental sustainability at least cost. 11

12 For more information please contact; Emily Keenan