The Direct Payments to Farmers (Legislative Continuity) Bill 2020 is a UK Government bill intended to incorporate the EU legislation governing the CAP Direct Payments Regulation into UK domestic law for the claim year 2020 and enable an increase in the total maximum amount of direct payments under that regulation for 2020. This briefing provides a summary of the Bill and a discussion of what it means for Scotland
The UK Government introduced the Direct Payments to Farmers (Legislative Continuity) Bill to the UK Parliament on 9 January 2020. As stated on the face of the Bill, the purpose is to:
"Make provision for the incorporation of the Direct Payments Regulation into domestic law; for enabling an increase in the total maximum amount of direct payments under that Regulation; and for connected purposes"
The Bill has three main functions:
To incorporate the EU legislation governing Common Agricultural Policy direct payments into UK domestic law for the claim year 2020.
To confer powers on the Secretary of State and Devolved Administrations to make changes to direct payments legislation to ensure that the law works properly for the claim year 2020, and to make amendments to mirror changes made to EU law during 2020, should the need arise.
To confer powers on the Secretary of State to be able to increase the direct payments ceilings for 2020.
The UK Government have sought legislative consent from the Scottish Government, and the Scottish Government published its Legislative Consent Memorandum on 13 January 2020, which includes a draft motion to consent to the Bill1. The following briefing sets out background information to this bill and outlines implications for Scotland and the interactions between this Bill and other domestic legislation.
The UK Government introduced the Direct Payments to Farmers (Legislative Continuity) Bill to the UK Parliament on 9 January 2020. As stated on the face of the Bill, the purpose is to:
"Make provision for the incorporation of the Direct Payments Regulation into domestic law; for enabling an increase in the total maximum amount of direct payments under that Regulation; and for connected purposes"
UK Government. (2020, January 9). Direct Payments to Farmers (Legislative Continuity) Bill. Retrieved from https://publications.parliament.uk/pa/bills/cbill/58-01/0005/20005.pdf [accessed 9 January 2020]
What are Direct Payments for Farmers?
Direct Payments are support payments for farmers based on the amount of land they own and manage for agricultural activities. The funding for these payments is provided by the European Union, which is also responsible for EU-wide regulation governing the payments.
There are multiple direct payment schemes provided for under the EU "Direct Payments Regulation". In Scotland, these are:
The Basic Payment Scheme (BPS), a non-competitive area-based payment that goes directly to farmers as income support.2
The Greening payment, which comprises one third of the total basic payment received by a farmer. This is a top-up payment for activities which benefit the climate and the environment. It is compulsory to participate in Greening to receive any part of the direct payment.3
Payments for young farmers, who do not automatically qualify for basic payments.4
In Scotland, some of the direct payments budget is also used to fund the Scottish Suckler Beef Support Scheme5, and the Scottish Upland Sheep Support Scheme6. These schemes are voluntary for EU member states. They are coupled to production, and as such are paid per head of livestock.
UK agriculture receives approximately £3.2bn of support from the EU per year. Across the UK, around 88% of this goes to direct payments, while the remainder goes to e.g. rural development, supporting new entrants, and supporting environmental outcomes.7
The Scottish agriculture budget accounts for nearly £550m per year8; much of this (approximately £438m) is spent on Pillar 1 schemes, which come under the Direct Payments Regulation9.
The majority of Scottish farms make a loss without support, and direct payments make up the largest share of support. In 2017-2018, farms on average made a loss of £14,600 from agricultural activities, which was offset by an average income from direct payments of £36,600.10
Payments are distributed by region, with higher payments to farmers on better quality land, and lower payments to farmers on poorer quality land. Scotland has three regions:
Payment Region 1 includes better quality agricultural land that has been used for arable cropping, temporary grass and permanent grass. Region 1 land was paid €165.63 per hectare in 2019.
Payment Regions 2 and 3 include rough grazing with a Less Favoured Areas (LFA), with region 3 being the poorest quality land. Region 2 was paid €36.16 per hectare in 2019, and region 3 was paid €10.48 per hectare in 2019. Much of the Highlands and Islands fall into regions 2 and 3.11
Why is this Bill considered necessary?
The Bill is intended to bridge what would otherwise be a gap in the legislation enabling direct payments to be made for the year 2020. As the Explanatory Notes for this Bill state, "this is because CAP Direct Payments for the 2020 claim year will be funded from the EU's new 2021 multi-annual budget (because CAP Direct Payments are paid in arrears)."7
The "multi-annual financial framework" (MFF) is the EU's long-term budget. The current MFF runs from 2014-2020, and a new budget is therefore due for 2021-2027.13 The MFF sets total amounts allowed to be spent on different interventions within the EU. However, because direct payments are paid in arrears, the 2020 claim year is paid from the 2021 budget, which is outwith the current MFF. Given the UK’s departure from the EU this year, and as a result of the terms of the Withdrawal Agreement, the UK will not take part in the EU’s 2021-2027 budget.
Under the European Union (Withdrawal Agreement) Bill which is currently before the UK Parliament, most EU law will continue to apply in the UK until the end of the “implementation period”, on 31 December 2020. On that day, most EU law will be converted into UK law, and called “retained EU law”. However, it was agreed between the UK and the EU in the Withdrawal Agreement on 19 October 2019 that the CAP direct payments legislation for 2020 will not continue to apply in this way, for the budgetary reasons above. Accordingly, this specific body of legislation will cease to apply when the UK leaves the EU on 31 January 2020. (This is set out in Article 137 of the Withdrawal Agreement).
Therefore, without new legislation, after the UK leaves the EU on 31 January 2020 there would be no legal basis for continuing to make direct payments to farmers in any part of the UK for claim year 2020. The UK Government intends to provide the necessary legal basis in this Bill. The Bill will do this by converting the relevant EU law on CAP direct payments for the year 2020 into UK law, with effect from the day on which the Bill is passed (which is expected to be before 31 January 2020). The Bill includes time-limited powers to continue to pay farmers for the claim year 2020, and makes associated provision.
In addition, the Bill includes provision to allow the UK Government to increase the payment ceiling for 2020, which sets the total amount that can be spent on direct payments in that year. This has been included to allow the UK Government to take account of the Bew Review on the allocation of farm payments within the UK.
What is "convergence funding"?
The concept of convergence was introduced in the 2013 EU CAP reform, and its purpose was to bring direct payments to more uniform rates within and between EU member states. Convergence funding was allocated to each member state to account for lower average per hectare payment rates. As a result, the UK was allocated €223 million (£190m) because its average for direct payments per hectare was less than 90% of the EU average.1 In 2013, the UK Government decided not to ring-fence this budget for convergence, and it was instead absorbed into the wider UK CAP budget, and divided amongst the four nations.
What did the Bew Review seek to address?
Chaired by Lord Bew, the Bew Review was commissioned by the UK Government to "make recommendations on factors to inform the allocation of farm support ‘convergence’ funding between the different parts of the UK for the financial years 2020/21 and 2021/22."1 Furthermore, the review was sought "to address a disagreement about the original distribution in 2013 of the additional convergence funding between the four parts of the UK."
The Scottish average payment per hectare is the only one of the four nations that falls below the EU's 90% of the EU average threshold to receive a convergence uplift. Therefore, since 2013, the Scottish Government has argued that the UK only qualified for this additional funding as a result of low payment rates in Scotland, and have maintained since that the majority of the convergence funding belongs to Scotland.
As a result, Scottish Ministers have pushed the UK Government to repatriate £160m which the Scottish Government felt was owed to Scotland. In response, the UK Government set up the Bew Review, though only to look at future allocations of convergence support for the years 2020/21 and 2021/22, a decision that the Scottish Government disagreed with.3
However, on 4 September 2019, the UK Chancellor, Sajid Javid, announced in his speech on the 2019 spending round that £160m will be reallocated to Scotland, addressing the historical spend it was felt was owed to Scotland4. Furthermore, on 6 September 2019, in publishing its recommendations 1, the Bew Review concluded that
"the convergence element of the 2020-2022 farm support budget be allocated according to the proportion of land in each part of the UK that in 2013 received less CAP funding per hectare than the EU average."
They therefore recommended allocating an additional €60m to Scotland over 2020/21 and 2021/22. However, the panel members stressed that this would be an inappropriate allocation in the long-term. Going forward, they
"encourage governments in all parts of the UK to recognise this value by protecting, if not enhancing, funding for agriculture in future. We also suggest that the UK government agrees with the devolved administrations principles for the allocation of that funding after 2022. They should recognise the social value of upland farming in particular and the challenges facing those practising it, as well as the potential for delivering environmental public goods alongside sustainable food production, wherever in the UK that potential exists."
UK Government. (2019, September 6). Intra-UK Allocations Review. Retrieved from https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/829757/intra-allocation-uk-review.pdf [accessed 14 January 2020]
The Scottish Government welcomed the results of the review, and the UK Government announcement on historical funds. With regards to how the Scottish funds will be spent, Cabinet Secretary for the Rural Economy, Fergus Ewing MSP, announced on 29 October 2019:
“In allocating this funding, I am conscious of the need to adhere to the spirit and original premise of convergence. This approach ensures that the money goes to where it was originally intended - with a significant proportion going to those farming in our marginal and remote areas. This funding will also meet my commitment to maintain support for farmers and crofters in the Less Favoured Area."
Scottish Government. (2019, October 29). Agricultural support outlined. Retrieved from https://www.gov.scot/news/agricultural-support-outlined/ [accessed 14 January 2020]
However, this increase in Scotland's allocation (and a small increase in Wales' allocation) would entail a decrease in the budget for England and Northern Ireland, and the Bew Review panel also recommended that the UK Government "offset the budgetary reductions that would otherwise be felt by those in England and Northern Ireland" so as not to create a disadvantage "at a time of acute uncertainty".1
The UK Government accepted the recommendations on the allocation of convergence funding for 2020-2022 and on the maintenance of funding to England and Northern Ireland in their response to the Bew Review report.9 In order to take account of these recommendations the UK Government would need to allocate additional money to ensure that there will be no reduction in farm payments for England and Northern Ireland. As a result, the Direct Payments to Farmers (Legislative Continuity) Bill anticipates the need to increase the legal maximum amount that can be spent on direct payments to farmers, or the "national and net ceilings".
The following sections outline the provisions of the Direct Payments to Farmers (Legislative Continuity) Bill. The key provisions of this Bill are Clauses 1, 3, and 5; remaining clauses contain associated provisions, such as consequential powers and interpretation provisions.
Clause 1 incorporates EU legislation governing CAP direct payments for the 2020 claim year into UK law.This provision will come into force on the day the Bill is passed by the UK Parliament. As outlined above, this is required because of the terms of the October 2019 Withdrawal Agreement, which provided for CAP direct payments legislation to not apply in the UK for the claim year 2020.
The clause specifies the EU legislation which will become part of UK law for the 2020 scheme year. The relevant legislation is:
The Direct Payments Regulation, apart from article 13 (see below)
Commission Delegated Regulation (EU) No 639/2014 of 11 March 2014 and Commission Implementing Regulation (EU) No 641/2014 of 16 June 2014, which establishes additional rules for direct payments.
The Horizontal Regulation and its supplementary rules and regulations, as they apply to CAP direct payments.
As an exception, the Bill provides that one article of EU CAP direct payments legislation will not convert into (domestic) retained EU law with the rest of this legislation when the Bill passes. This is Article 13 of the Direct Payments Regulation, which exempts direct payments to farmers from being considered to be "state aid". State aid is regulated in the European Union to ensure that payments or subsidies given by governments and public authorities to people or organisations within their own territory do not distort the workings of the internal market. The reason why this Bill does not convert Article 13 into retained EU Law in this Bill is because the October 2019 Withdrawal Agreement already provides that Article 13 remains in effect for the UK for 2020.
Finally, the clause clarifies that this Bill will have no effect on claims made in any previous scheme years, and will apply for the whole scheme year 2020; that is, when the Bill becomes law (expected to be before 31 January 2020), it will apply as though it came into force from 1 January 2020.
Clause 2 sets out rules for interpreting retained EU law governing CAP direct payment schemes. This clause clarifies definitions, sets out how retained EU law is to be used by UK courts, and restricts how retained EU law can be amended by primary and secondary legislation. More detail can be found in the Explanatory Notes to the Bill.
Clause 3 gives the Secretary of State and devolved administrations, including the Scottish Ministers, the power to make changes to correct deficiencies or failures of retained EU law to operate effectively after the UK leaves the EU, to ensure that the direct payments legislation continues to operates effectively in the UK for the claim year 2020.
This clause also allows the Secretary of State or devolved administrations to modify retained EU law on direct payments to mirror changes made in EU law for the claim year 2020, should the need arise. This is known as “keeping pace”. The Delegated Powers Memorandum outlines how the UK Government intends to use this power:
"The Withdrawal Agreement specifies that the UK’s domestic Direct Payments for claim year 2020 will benefit from the existing state aid exemption where they are equivalent to the scheme in the EU’s Direct Payments legislation. If that legislation 5 were to change after 31 January 2020 we would need to consider whether we would need to similarly change our legislation to continue to benefit from the state aid exemption for claim year 2020. The power in clause 3(1)(b) allows the Secretary of State to amend the retained EU law on Direct Payments in such circumstances."
UK Government. (2020, January 9). Memorandum from the Department for Environment, Food and Rural Affairs to the Delegated Powers and Regulatory Reform Committee. Retrieved from https://publications.parliament.uk/pa/bills/cbill/58-01/0005/20200108%20DPLC%20DPM.pdf [accessed 15 January 2020]
Clause 3 also places a duty on the Secretary of State to obtain consent from the Scottish Government in order to make regulations which apply in Scotland. It also gives Scottish Ministers the corresponding power to make changes to correct deficiencies in the retained EU law on direct payments to ensure that the direct payments legislation operates effectively in Scotland for the scheme year 2020, and to modify EU law to mirror any changes made to EU law for this year. For Scotland, these powers can be exercised either by UK Ministers with the consent of Scottish Ministers, or by Scottish Ministers acting alone.
The requirement for consent is a significant difference between the powers in this Bill, and the equivalent deficiencies-correcting power in the European Union (Withdrawal) Act 2018 (the “2018 Act”) to correct deficiencies in any retained EU law (across all subject matters). The difference is that the power in this Bill can only be exercised in relation to Scotland by UK Ministers if they have the consent of the Scottish Ministers, whereas consent is not required for the exercise of the equivalent power in the 2018 Act.
Clause 3(6) refers to Sections 8(5)-8(7) of the 2018 Act stipulating that these sections apply (with a minor exception) in relation to regulations made under Clauses 3(1) and 3(3) of this Bill.
Sections 8(5)-8(7) of the 2018 Act, as set out in the Explanatory Notes for this Bill, specify that "secondary legislation made under the power in [Section 8(5)] can do anything an Act of Parliament might to deal with deficiencies. This could include altering Acts of Parliament where appropriate and sub-delegating the power to a public authority where they are best placed to deal with the deficiencies"2. These sections also specify what secondary legislation under these powers can and cannot do.
This makes use of parts of the European Union (Withdrawal) Act 2018 that some have referred to as "Henry VIII powers". The UK in a Changing Europe explain that Henry VIII powers are "provisions sometimes included in bills to allow ministers to make amendments to not only secondary legislation but also primary legislation (Acts of Parliament), without having to go through the full process that an Act of Parliament would require."3Powers in this section allow the UK Government to make use of secondary legislation, in certain circumstances, in a way that would ordinarily need to be done by an Act of Parliament.
Importantly, Subsection (8) of this Clause limits the powers, so that they will expire on 31 December 2020, and cannot be used after that date. However, this does not apply to regulations which are made under these powers, which (depending on their own terms) can continue in force indefinitely.
Clause 4 requires the legislation which is being brought into UK law by clause 1 to be published, and sets out when this must be done. Publication of legislation in the UK is the responsibility of the Queen’s Printer (the Queen’s Printer runs the site www.legislation.gov.uk). The European Union (Withdrawal) Act 2018 sets out how the rest of retained EU law is to be published by the Queen’s Printer.
This clause also makes provision in relation to the rules of evidence in court proceedings which will apply, after EU exit, to the legislation that comes into UK law under this Bill. The 2018 Act contains a power for UK Ministers to make regulations on this for the whole of retained EU law (across all subject matters)(2018 Act, Schedule 5, para 4). This clause allows the power in the 2018 Act also to be exercised in relation to the retained direct EU CAP legislation which becomes UK law under this Bill. This is a technical provision concerning whether, in a court case in which a specific piece of legislation is relevant, the court requires to hear evidence to prove that the piece of legislation is in fact law, or whether the court can take that as read.
Clause 5 amends the Direct Payments Regulation to allow the Secretary of State to increase the UK Direct Payments ceilings for the scheme year 2020. This is to take account of the Intra-UK Allocations Review (the Bew Review) published on 6 September 2019.
The "national ceiling" refers to the total value of all payment entitlements for direct payment schemes.
The clause inserts a new Article into the Direct Payments Regulation as retained by the UK:
“Article 7A
7A Increase in national and net ceilings
(1) The Secretary of State may, having regard to the recommendations contained in the report of the Bew Review, decide to increase the total maximum amount of direct payments that could otherwise be granted in relation to the claim year 2020.
(2) In this Article, the “report of the Bew Review” means the report entitled “Intra-UK Allocations Review” published on 6 September 2019.”
The Explanatory Notes state that "Regulations made according to decisions relating to the 2020 net ceiling will require the consent of all devolved administrations", and clarify that any increase in net ceilings will result in increases in payment entitlements.
See the previous section for the conclusions of the Bew Review, and what this means for Scotland.
Clause 6 contains consequential and transitional provisions, for example it confers power to make regulations in consequence of this Bill. These regulations can modify primary and secondary legislation.
Subsection 5 of this clause provides that the Secretary of State can make regulations in relation to the constituent nations of the UK only with the consent of the relevant devolved authority, in Scotland's case, the Scottish Ministers. The Scottish Ministers, acting alone, are also given power to make regulations for Scotland under this clause.
Clause 7 gives legal effect to Schedule 2. Schedule 2 sets out the detailed rules for making regulations under this Bill, specifying which procedure must be used for different regulation-making powers, and the time-period for scrutiny.
Clause 8 lays down the definitions of certain words and phrases used in the Bill.
Clause 9 provides that the Act extends to England and Wales, Scotland and Northern Ireland. It specifies that the Bill's provisions come into force on the day on which the Act is passed, with the exception of clause 5 (power to increase ceilings for direct payments for 2020) which comes into force on the date of exit from the EU, which is due to be 31 January 2020.
On 30 December 2019, Chancellor Sajid Javid announced £2.852bn of funding to maintain direct payments at the same level for 2020. The UK Government stated that:
"The cash injection will allow the funding for Direct Payments for 2020 to continue at the same level as 2019 and supplement the remaining EU funding that farmers will receive for development projects until 2023 at the latest. We will guarantee the current annual budget to farmers in every year of the Parliament."
UK Government. (2019, December 30). Farmers’ £3 billion support confirmed in time for 2020. Retrieved from https://www.gov.uk/government/news/farmers-3-billion-support-confirmed-in-time-for-2020 [accessed 13 January 2020]
The funding is spread across two years, and divided up between the four UK countries. Scotland will receive £449m in 2020/2021, and £24m in 2021/2022.
The Bill and Devolved Policy
The UK Government is proposing that this legislation should cover the whole of the UK, including Scotland. However, since agriculture is a devolved policy area, the Bill specifies that any regulations for Scotland must be made with the consent of Scottish Ministers. It also (e.g. in Clause 3 on modifying the legislation) confers powers on Scottish Ministers to make changes themselves.
The UK Government is therefore seeking legislative consent from the Scottish Parliament and the National Assembly for Wales to make these provision (and contains provision for Northern Ireland for which legislative consent would ordinarily be sought). Annex 1 of the Explanatory Notes confirms that Clauses 1-9 all extend and apply to Scotland, and that the UK Government is seeking legislative consent for each clause.
The Scottish Government confirmed that the Bill makes provision within the legislative competence of the Scottish Parliament, and acknowledged the UK Government's recognition of this.1 The Scottish Government confirmed on Monday 13 January 2020 that it intends to seek legislative consent from the Scottish Parliament. The Legislative Consent Memorandum states:
"This Bill is required to enable existing direct payment schemes to continue in the 2020 claim year. The disapplication of the direct payments legislation will be a direct result of implementing the Withdrawal Agreement negotiated by the UK Government. The legal vacuum created by the actions of the UK Government must be addressed given the importance of these schemes to Scottish farmers and crofters. Therefore, the Scottish Government believes the continued application of these schemes in Scotland must be legislated for in the limited time available. To ensure this, the Scottish Government intends to seek the Scottish Parliament’s formal legislative consent to the Bill in these exceptional circumstances."
Scottish Government. (2020, January 13). LEGISLATIVE CONSENT MEMORANDUM DIRECT PAYMENTS TO FARMERS (LEGISLATIVE CONTINUITY) BILL. Retrieved from https://parliament.scot/S5ChamberOffice/SPLCM-S05-30.pdf [accessed 14 January 2020]
At the time of writing, the draft Legislative Consent Motion which the Cabinet Secretary for the Rural Economy, Fergus Ewing MSP, intends to lodge reads:
“That the Scottish Parliament agrees that the Direct Payments to Farmers (Legislative Continuity) Bill, introduced in the House of Commons on 9 January 2020, bringing the legislation governing the 2020 CAP direct payment schemes into domestic law, granting powers to fix deficiencies in that legislation and to keep pace with changes in EU law during the Implementation Period, in so far as these matters fall within the legislative competence of the Scottish Parliament and alter the executive competence of the Scottish Ministers, should be considered by the UK Parliament.”
The Scottish Government also anticipates that there will be a need for secondary legislation to fix deficiencies in the legislation, some of which will need to be addressed prior to the 31 January 2020.3 In a letter from the Cabinet Secretary Fergus Ewing MSP to Edward Mountain MSP, convenor of the Rural Economy and Connectivity Committee, the Cabinet Secretary noted
"...some of the secondary legislation that would need to be made under the 2020 Bill, once enacted, must be in force by 31 January. While the number of instruments is currently uncertain, it would be a mix of UK and Scottish legislation, as is the case for the deficiency fixes under the European Union (Withdrawal) Act 2018 ("EUWA"). The UK legislation would make changes to the former EU law that is rolled over into national law by the 2020 Bill, and the Scottish legislation would change our national implementing rules."
Ewing, F. (2019, December 19). Letter to Edward Mountain MSP, convenor of the Rural Economy and Connectivity Committee, from Fergus Ewing MSP, Cabinet Secretary for the Rural Economy. Retrieved from https://www.parliament.scot/S5_Rural/Letter_from_Cab_Sec_for_fe_to_e_mountain_19_dec.pdf [accessed 13 January 2020]
Relationship between the Direct Payments to Farmers (Legislative Continuity) Bill and the Agriculture (Retained EU Law and Data) (Scotland) Bill
Scrutiny of a separate, but related, piece of Scottish Parliament legislation is currently underway. The Agriculture (Retained EU Law and Data) (Scotland) Bill is at the time of writing at Stage 1 and is being scrutinised by the Rural Economy and Connectivity Committee.
These two Bills serve complementary purposes. The UK Bill responds to the need for legislative provision in order to be able to make direct payments to farmers for the current year, and the powers in the Bill are time-limited and expire on 31 December 2020.
The Scottish Parliament Bill, on the other hand, makes provision which are expected to be required from 1 January 2021 (Section 3 of the Agriculture (Retained EU Law and Data) (Scotland) Bill provides for the operation of CAP legislation “for one or more years beyond 2020”). While the powers in the Scottish Parliament Bill are not time-limited, it is also intended to make provision during a transitional period, but for the slightly longer-term compared to the UK Direct Payments Bill.
Moreover, the UK Bill only makes provision for direct payments for the scheme year 2020, principally to fix deficiencies in the direct payments legislation and to amend the national ceiling for direct payments. This is because the October 2019 Withdrawal Agreement only opts the UK out of the Direct Payments Regulations, not the full suite of CAP regulations.
By contrast, the Scottish Bill makes provision to allow Scottish Ministers to amend any part of the main CAP legislation "that they consider would simplify or improve the operation of the provisions of the legislation". This includes the Rural Development regulations which govern Pillar 2 payments, the Common Organisation of Markets regulations, and the whole of the Horizontal Regulation on financing, management and monitoring of the common agricultural policy, not only as it relates to direct payments.
However, the Scottish Bill does not provide for direct payments to continue to be paid to Scottish farmers during 2020 in the absence of the Direct Payments Regulation applying to the UK.5