Good afternoon, everybody. Welcome to the first public evidence session of the Environment, Food and Rural Affairs Select Committee. We are delighted to have with us Steve Reed, Secretary of State for Environment, Food and Rural Affairs. You are very welcome, and I hope this is the first of many appearances you will have in front of us. It is the intention of the Committee that in providing scrutiny for your Department, as Parliament requires us to do, we should also contribute to providing better value and better outcomes for all our constituents, at the end of the day. So I hope that—while we have different jobs to do and occasionally we will take different views—this will be something that will ultimately be better for everyone as a consequence. Can I ask you, Secretary of State, for the benefit of the record, to introduce yourself and your colleagues who are with you?

First of all, thank you for your welcome, Chair. I am delighted to appear before the Committee. I think I know most members, but not all. I hope, perhaps over the coming years, we will get to know each other better. I am very much looking forward to working collaboratively with the Committee. I started out my parliamentary career on a Select Committee, so I understand and value the work that you do. Just as I think you are mostly—apart from the Chair—new MPs learning the ropes in your new jobs, I am still a relatively new Secretary of State and it is fair to say, learning the ropes in mine as well. I suspect we can do some of that learning together. I am Steve Reed. I am the Secretary of State for the Environment. I have two of the Department’s directors general with me, David Hill and Emily Miles.

It had originally been my intention that we would use this as an opportunity to explore the wider strategy of the Department, and maybe take a good, broad general look ahead. That is still important, and I hope that we will be able to get to that business today, but you will not be surprised to know that this is perhaps one of those occasions where the urgent will have to trump the important for today. I want to kick off this afternoon’s evidence session by asking you about some of the changes that were made as a consequence of the Budget at the end of last month and, in particular, the changes to inheritance tax, agricultural property relief and business property relief. Before that, though, I want to just take a step backwards, Secretary of State. Before the election—maybe even before the Budget, I do not know—your policy was not to interfere with APR and BPR. When that was your policy, what did you hope to achieve with it?

One’s policy has to reflect the circumstance in which one is taking decisions.

I get that.

That is right. The policy must always reflect the circumstance in which you are taking decisions. Although we did not have plans to change the inheritance tax or APR circumstance applying to farmers or landowners, as you will also be aware, after the election, the incoming Government discovered a £22 billion black hole in the public finances, just to stand still. That did not allow for any investment to repair our absolutely shattered and broken public services. We have a national health service that is absolutely on its knees.

If anyone is playing Select Committee bingo, you can mark £22 billion off your card, but this is about the purpose. If you had not come into that and you had stuck with your policy, what was the purpose of that? What did you hope to achieve with it?

The Chancellor and the current Prime Minister made it clear at the time that the intention was always to fix the foundations of the economy, but doing that work required us in the end—I know you are making light of it there, but a £22 billion black hole in the public finances is an incredibly serious problem. Just finding £22 billion does not give you anything to improve public services that were performing at their worst. The intention all the way through—in the run-up to the election and in the years before that—was to ensure that we took the necessary decisions to stabilise the economy. You saw what happened to it under Liz Truss’s premiership when it crashed, sending mortgage rates spiralling, interest rates spiralling, prices in the shops spiralling and an out-of-control cost of living crisis infuriating people up and down the country. We had an electorate looking for change, but the circumstances as they appeared before the election were different after the election, because we believe the previous Government deliberately covered up the state of the public finances.

Let me reframe my questions slightly then. The purpose of APR and BPR for Governments before yours, going right the way back, was for it to be a mechanism by which the succession and the continuation of family farms passing from one generation to the other would be achieved. Was that ever part of your thinking?

The relief did not exist until 1992, when it was introduced. So presumably up until that point, despite that relief not existing, farms had passed from generation to generation. I would hope that they will continue to pass from generation to generation after these changes have been made. I know, for instance, that the Liberal Democrats at one point proposed changing IHT to reduce the level of the relief. That had been discussed along the way by different political parties, but it did not exist before 1992, yet these intergenerational inheritances have happened, presumably, in all of the decades leading up until that point. So yes, the intention would be, as we set about fixing the foundations, stabilising the economy, reinvesting in our public services, that of course, we want family farming to continue just as it always has done.

To move on to where we are today, you have said that only the richest estates will be asked to pay, not small family farms. What is your definition of a small family farm?

I will tell you how we came to that statement, Chair, if I may.

Please.

There are a lot of figures flying around at the moment. We are all aware of the protests going on outside. I am very aware of the concerns farmers feel. I have been engaging with the NFU, the CLA, the Tenant Farmers Association, and some of the people in this room. We were having a chat before we came in, and I have met some of them before as well, so I understand people’s concerns. But the best measure that we have for what is going to happen is the last year that we have for hard data for claims for APR, and that was 2021-22. There is a set of data that HMRC has provided. The Treasury has run projections based on that that take into account the different factors that were at play in looking at those figures—that is, APR, business property relief, capital roll-over allowances, the nil-rated allowances that people are permitted when they are making transfers of assets through inheritance after death. Their projections showed that around 500 estates, and probably less, would be affected by these changes in any year, and the rest of the sector would not be. If you look at the percentages that that takes you to, that is around three quarters of estates not affected and around one quarter affected, but assuming no behavioural change. In all likelihood, people seeing the change to APR are likely to change their behaviours by taking tax advice and then changing what they are doing based on that tax advice. Tax planning, as any business would do, is likely to reduce the liability even further from that figure of around a quarter.

We are changing the tax law and anticipating that people will avoid it.

If I might make one further point, because people have queried whether these figures from HMRC and the Treasury are accurate. These figures have been validated by the independent Office for Budget Responsibility and the independent Institute for Fiscal Studies, the independent financial think-tank. So I have every reason to believe—and we should all have every reason—to believe that this data, projections based on actual hard data, is accurate and that the vast majority of farms will not be affected by the changes to APR, which is what I have said.

I will come to the vast majority of farms in a second, but the figures that you have validated were in relation to applications for relief using APR. There was previously an interaction between APR and BPR, which has also changed. Do you expect that change to have an impact on how the estates will be caught in the future?

After concerns were raised with me, I met officials from the Treasury to try to understand better how the projections have worked, and they had taken these other factors into account as well. So it was not just APR.

The farmers around the House of Commons today have also looked at their situation. They know their business and there are a lot more than 500 here saying that they are going to be affected. Are they wrong?

Assuming that these projections from HMRC—validated by the OBR and the IFS—are correct, then many of them, probably happily, are wrong, because there are things that they can do to plan their tax affairs, as most businesses or asset owners would do, to limit their liability. The numbers I have heard bandied around are enormous and very frightening, if people were to believe them.

Based on DEFRA data and the size of farms.

It is based on DEFRA data, which shows you the value of a farm, and then people have drawn a straight line to an inheritance tax liability, but you cannot do that because ownership is much more complex than one person, one farm. When you take into account these other factors, as the Treasury has done, as the OBR has done, as the IFS has done, they all say that less than 500 would be affected each year.

Let’s just look at this question of behavioural change. By that do you mean more transfers inter vivos?

I am not going to give tax advice. The circumstances change from individual to individual.

Well, what other behavioural changes are you expecting?

That is one of the options available. There are many options that would be available, but the best thing to do is not to listen to a Minister of the Crown as to what you should do with your tax affairs. Listen to your tax adviser, who can give you detailed advice based on your own personal circumstances to ensure that you are managing your tax affairs as effectively and efficiently as possible.

You will be pleased to hear that, like you, I am not going to be in the business of giving tax advice, but the tax advice that farmers will have had hitherto is, “Hold on to your farm because that is the best way of ensuring succession.” There are people farming into their 70s and indeed into their 80s. Do you know why they are farming as late in life as that?

Yes, of course I do; I have been speaking to a lot of people about their circumstances. One of the reasons for the delay in implementing the changes is to allow people to start planning their affairs. It does not come into force until April 2026. It will not be in the Finance Bill until 2026. That gives people more time to start planning.

Eighteen months, and if you make an inter vivos transfer it is seven years, is it not?

With a taper. That is right.

If I were sitting here as a farmer in my late 70s or my 80s, having relied on this idea—my inheritance tax was planning that I would hold on to it, and I would get the relief—I probably do not have a pension beyond the state pension because I have been putting the money, such as it is, back into the farm. There is a better than fair likelihood that a lot of these people will not get to hand on their farm as they had expected or intended. Is that fair?

Everybody gets their inheritance tax exemptions. An individual with a property can pass on £500,000. That can be transferred to a spouse. If they predecease—

If they are married.

If they are married or civil partners. That takes it up to £1 million. Each individual can have an APR allowance of £1 million. It may not be restricted to a couple. There may be other people involved as well. It starts to get complicated, because you are talking about very different circumstances, case by case. The best thing to do is for people to take professional tax advice and manage their tax affairs appropriately, but I do not think the public will consider it reasonable that people with multimillion-pound assets should not pay any inheritance tax, in certain circumstances. As I said before—

Do you think the public’s view on that would be changed?

From the data projections, the vast majority of farmers will still pay nothing.

What does your Department say about the return on that £3 million asset? What is the revenue that they earn on the basis of that, in percentage terms?

In what terms? What are you talking about?

DEFRA figures tell us that the return on that family farm, that £3 million farm, is 0.5%.

Yes, absolutely. I completely understand that profitability within the farming sector is very low at the moment. That is why some of the things we are looking at are about how we can help improve the profitability of farming.

It is not just at the moment. This is not something that has just happened. Profitability has been like this for decades.

It has got worse since 2018, actually, if you are looking at the figures. It has got more and more difficult. It was hit very hard by the escalating energy prices of a few years ago and which have stayed high ever since. There are things that we can do about all of those things to improve farm profitability. We do not just have to accept that the sector is stuck in some doom loop where they can never make any money. We have to support farming to become a profitable, thriving sector. There are steps that we can take to help with that, and the Budget seeks to do that. As part of the Budget, we allocated a sum of £5 billion over two years, which is the biggest budget for sustainable food production in our country’s history.

The early ending of basic payments in England is going to help the profitability of farming, is it?

I go back again—we had a £22 billion black hole in the public finances to plug, just to stand still. If we then wanted to raise funding to improve failing public services—like the NHS, schools, affordable housing and potholes cratering roads in the countryside, just as well as everybody else—we had to find the money to fix those problems, so that we can stabilise and start to grow the economy and then properly fund our public services. That involved decisions that I fully accept are very, very difficult, and they were not decisions that we had anticipated before the general election. By taking them, we can rebuild the foundations of the economy to allow it to grow and rebuild our public services in ways that will benefit farmers, as well as everybody else living in the countryside, but also take action to boost farming profitability.

I want to move on to tenant farmers in a second, but at the weekend, I was speaking to farmers in my own constituency about 300-acre farms, probably in the region of about £3 million, including stock and machinery. They are earning £25,000 a year or thereabouts on that. If they have to pay inheritance tax on the value above the £1 million, where is that money going to come from? It is not going to come from their income. They are going to be selling land, aren’t they?

Well, it would not be them. It would be their heirs, to be absolutely accurate, because of course this only comes after somebody has died. It is an inheritance tax. It is not that individual continuing in the business. By definition, they are not in a business any more. It is a very established principle that when you have a very valuable asset, on death, for people who are very wealthy, a share of it will go back to the state. What I want to do for farmers today is help their profitability, while they are alive and while they are running those businesses. I think the £5 billion going into SFI will help with that. The work that we are doing to set up GB Energy and harness power—wind, wave, solar and nuclear—will cut energy bills. The work on planning reforms will allow diversification to go ahead faster. I have spoken to farmers who have started generating their own energy, and it has taken them 10 years to get planning permission to connect to the national grid. We can turn that into months, rather than years, to help farmers diversify. We are looking at how we can back British produce by using the power of our public sector purse to buy more British produce—

We are getting a wee bit off the beaten track here, Secretary of State—forgive me, but we are under the pressure of time.

Not really, because I am talking about how we make the sector profitable. You are telling me that it is not profitable, as though that is a God-given fact of life forever, but it isn’t. There are things that we as a Government can do to help the sector succeed.

We will go over that when you come back next time. I want to move on to the question of tenant farmers, who are obviously going to be affected differently. I do not think anybody goes into tenant farming to protect their hundreds of millions. What assessment has the Treasury made of the impact of these changes on tenant farmers?

Tenant farmers are going to be affected differently by this, aren’t they, because by definition, they do not own the land, and they will not be paying inheritance tax on the land? I think there are potentially—

Do you think it is foreseeable that their landlords might want to end tenancies and bring the asset back in hand, so that they could manage it in their own most tax-efficient way, as you have been suggesting people should do?

There is always a risk, when you have a landlord, that they might sell their asset, but there is a chance that they won’t as well. There is a chance that tenants who have wanted to buy their own land, or some of their own land, will have that opportunity as well. Some of the other changes may well reduce the value of land. The phasing out of BPS may have the impact of reducing the value of land. The APR changes may have the effect of reducing the value of land. That reduces liability after death because the asset is worth less but—

Is the Government’s policy that you want to see the value of land falling?

The value of land is extremely high, and it has gone up way above the rate of inflation for years now.

Yes, it is.

If you speak to young farmers—

Is it Government policy to see a fall?

—they will tell you how difficult it is to ever get their opportunity to own their own land, because of the price of land. If you look at last year, the majority of agricultural land that was sold went to non-farmers.

I think you said 50% on Twitter this morning.

If we can make land more affordable to farmers, there is a chance, if there is a change in ownership of tenanted farms, that some of those tenants can buy their own land, or buy some of their own land. So there are opportunities. I do not think you should look at change as being inherently negative. Changes can bring positives as well, and by reducing land values—which is a possibility in this; I am not saying it is definite—we can open up the chance of farm ownership to more young farmers. At a time when the average age of a farmer is around 60, and we need to get younger people into the sector, boosting profitability and making it more affordable surely are desirable outcomes.

Okay. I will ask my final question on this. The Tenant Farmers Association suggested in their evidence that leases that were constituted to run in excess of 10 years could be the ground for exempting estates from inheritance tax. That is pretty much in line with some of the suggestions of the Rock review. Do you think you have missed an opportunity to encourage more tenancies to be extended, which surely would be something good?

There are things we could do to improve business opportunities for tenants. That is why we have announced our intention to create the new position of a tenant farming commissioner. The point of that role would be to improve collaboration between the tenant farmer and the landowner, to ensure that the code of practice for tenant farming is properly enforced, to be an advocate for tenant farming to Government and to other agencies, and to provide appropriate advice, both to tenant farmers and to their landlords. We are making changes that I think will help. I am always happy to meet George Dunn and the TFA. I have met him regularly already, and I will keep doing that. It is very important that we do what we can to support tenant farming. That is about one third of all farmland in the country, and we should not neglect that. [Interruption.]

There is a Division; the sitting is suspended. Sitting suspended. On resuming—

The sitting resumes. Apologies for that. For those of you who are visiting Parliament, that is one of the delights of the parliamentary day. Secretary of State, you will be pleased to hear that I think I have hogged the questions for long enough. But a few colleagues have questions to put to you.

Thank you, Chair, and good afternoon, Secretary of State. I have just a couple of questions, going back to ownership, initially. The Treasury claims data is based on some numbers that were quite interesting: 27% of those claims assets were under £250,000 and 23% were under £0.5 million, which seems quite low. What analysis was done on that split? Were they hobby farmers, smallholders, part owners of larger farms or maybe even landlords? That obviously will have some impact on whether they were the people actually producing the food. Of course, food security is ultimately important. I also want to look a bit more at rolling together the BPR and the APR, because, of course, those people who are actually farming will have both, and potentially even if they are tenant farmers, they will be looking at claiming BPR relief for their machinery, their livestock and so on. Would that have more of an impact on them, because they are the ones actually doing the farming, and therefore, that goes back to them being the ones involved in food security?

You are absolutely right. I am sure there is a wide variety of farms, properties and ownership in there. The point I was trying to make is that that is the best starting point we have. That data is the only hard data we have for how many claims were actually made against APR for this kind of land. The Treasury’s projections have taken into account the interaction of APR with BPR with other capital allowances, capital roll-overs, the nil-rate allowances as well, and then projected it forwards. It might be worth the Committee speaking to Treasury directly, if you are interested in the specifics of how they have done their calculations or what assumptions were fed in. That is something that I have asked for as well.

If you could persuade Treasury to provide us with that detail and that data, that would be enormously helpful. It might even be in their best interests.

Yes.

For many farmers, this will be the final nail in their coffins, or that is how they feel at the moment. Have you recognised, therefore, the impact that this decision is going to have on many farmers’ lives? We have had many years of turbulence in the farming sector, through trade deals, the transition from CAP to ELMs, and the energy price increases, input increases and various others. Many, many farmers feel that they are at the bottom of that trough, and many are devastated. Many of my colleagues here have had farmers visiting Parliament today. I am from a farming family, and I feel very deeply the devastation that farmers are going to face. I have had nothing in my family conversations over the last couple of weeks about how this is going to impact my family. I have a couple of questions that have come from my family but also from farmers that I have spoken to over the last couple of weeks. The transition period is not long enough, particularly for older farmers. We need at least seven years to be able to transition, to adequately prepare and to make those considerations. I would also like to know what constitutes an active farmer, as opposed to those that are looking to invest in land. Also, because there is the disparity in some of the figures that have been put out around the calculations, can I have an indication on whether an impact assessment has been made regarding the disagreement between the Departments? I would also like to know whether the Department is able to qualify what a modern farm looks like.

You have packed a lot into that. Let me start with the point you made about how people feel. I completely recognise that any change is going to be very worrying for people, particularly as this allowance has existed since 1992. I completely understand how unsettling that is. That is why I think it is important that I am listening, and I know colleagues on all sides of the House are listening as well. People were coming up to me just now in the Lobby, telling me that they have been listening to farmers today and what farmers have been saying. A very important part of what we do as parliamentarians is to listen to people and feed in what they are saying. I go back to this point: the data that we have from HMRC—validated by the OBR, validated by the IFS—shows that, even without behavioural change, the vast majority of farmers would not be affected and that only around a quarter of claimants would pay anything. Those claimants can take measures, on advice, that can further reduce their liability. Those points are still valid. You mentioned who is buying up agricultural land. The statistics I saw show that increasingly, year on year, agricultural land that comes up for sale is being bought by non-farmers. That information comes from the Treasury, so I can get the detail of that and write to you about precisely how they define a non-farmer. I can make as good a guess as you can from the language that is being used that it is somebody who was not farming previously. But if you look at it year on year, more and more agricultural land is going to those people, and year on year, the value of land is going up way above inflation. I think for the last year it was something like twice the rate of inflation for non-agricultural land, or for property prices in general. That trend has been going on for quite a long time. I suspect that part of that is being driven by wealthy individuals who are buying up agricultural land, potentially as a means to avoid an inheritance tax liability; some of them will be very open about that. If you are listening to tax advisers or tax consultants, some of them will freely give this opinion in public. One of the best ways to shield a large amount of money from inheritance tax is to buy agricultural land. That is not because they are interested in farming or in food security or food production; it is because they are interested in avoiding the liability that they would otherwise incur. That cannot have been the intention of APR, when it was introduced, so I think we do need to look at that. We need to look at the impact that that is having on land values and how that is pricing farmers out of being able to access this land. As I have said throughout the session so far, based on the independently verified data that the Treasury has supplied, the vast majority of farmers will take nothing, and if they take action on advice, that liability, even for those who will incur some charge, can be further reduced.

Four colleagues want to come, so I ask everybody to keep it sharp, because we do need to cover other areas.

I absolutely agree, Secretary of State, that listening is very important, but you are in a privileged position to be able to listen and then do something about it. Let’s go back to the beginning of this policy change on property relief. Was this an idea that you presented to the Treasury, or was it something that the Treasury imposed on DEFRA?

I am not going to get into the mechanics of Government decision making. I am happy to talk about the decision that was made in the Budget. I think that is what matters. The Budget is endorsed by the whole of the Government, and we will stand behind those decisions.

I will rephrase that. What representations have you made on behalf of farming to the Treasury, in relation to these decisions?

Again, I am not going to air the private conversations that I have had with colleagues. We stand behind the decisions. I am happy to defend those decisions. I am also happy to listen to views about how those decisions could be dealt with differently for the future. It is important that all politicians are listening as much as we can, and I have a responsibility to do that as a member of the Cabinet.

Would you be willing to alter your course on this?

The decision has been taken in this case. The thing that I am picking up is that a lot of people who, based on the Treasury data, will not be affected by changes in APR, currently believe that they will be affected. It is very important that those people get adequate advice. There is some signposting available from DEFRA on the farming resilience fund—I think that is what it is called—that people can apply to, to get help to signpost them to advice. Businesses have tax accountants. They have advisers. That would include farmers. It is important that they speak to those people as well to get accurate information about how this will affect them.

Secretary of State, I think the best help would actually be to reconsider. You say you are listening, but it is very much listening with closed ears at this point. One of my main concerns is that you have set the threshold very low at £1 million. One of my questions is why, if you actually want to tax very, very wealthy farms, did you not set the threshold at an appropriate level? You must appreciate that you are directly targeting the working farmers that you say you are trying to protect. Here is another question: do you even know how much a new tractor and a new combine harvester will cost? Three of those sorts of vehicles, which are the working equipment, will take you to the £1 million threshold. So why did you not set the threshold higher, because you are automatically pulling them in at this point?

You say we should listen, that I should listen, but I think that applies to all of us in Parliament as well. If you listen to the public in the countryside as well as elsewhere—

Which we are.

I saw data on the views of people in the countryside just yesterday. Their top issue is the cost of living and how that is affecting them. Their second issue is the national health service and the decrepit state of it. If this Government had not taken action to plug the £22 billion black hole that we were left by the previous Government—

Yes, but please, you keep using these soundbites, Secretary of State.

—and that is just to stand still, the cost of living crisis would simply get worse and worse, as it did under the previous Government, and the national health service would continue in freefall, as it did under the previous Government. You cannot just magic money out of nowhere to fix these problems.

Secretary of State, this is not actually answering the question.

Liz Truss tried that, and it crashed the economy and made it worse.

These are soundbites. Secretary of State, please address the question.

I am just explaining why I am listening to people in the countryside and why we are taking the action that we are taking.

But you are not listening to—

I know you do not like my answers, with the greatest respect—

Nobody gets heard if both are talking at the same time.

Yes. I know she does not like my answers, but I have been listening to people in the countryside, and this is what they want us to do. That has involved taking difficult decisions. You cannot just wish the difficult decisions away and only do the nice things. Difficult decisions have to be taken to fix the foundations of the economy, and that is what we have done. The £1 million threshold for many people will be far higher in reality than £1 million. If you are a couple with a property and you are passing it on to a family member, that becomes £3 million. A lot of people would think that £3 million of assets being passed on to an heir, without incurring inheritance tax, is quite generous. Not only that, but when the inheritance tax liability occurs, it is at half the rate that anyone else would have to pay and, instead of being paid in one go, like anyone else, it can be spread over 10 years. That is still a generous package of support for people, but it will only apply to the wealthiest individuals and the biggest farms. As I have said all the way through, the vast majority of estates will pay nothing as a result of these changes, but they will all benefit from the repairing of our broken national health service that farmers, people in the countryside, just like the rest of the population, rely on.

Based on a typical 200-acre farm, though, with an annual profit of about £27,300, the IHT bill would come out at £435,000 over 10 years. That would require them to reallocate 159% of their capital employed each year, so it is not realistic to pay this. Also, what the farmers are telling us, on the ground and practically, is that they cannot forward plan because they know that, potentially, they will not invest, because if they invest more, that will push up their bills. Their only measures are therefore to sell land or to not reinvest. So I do not see that you are allowing farmers to grow and be the profitable industry that you are saying. You are actually physically harming them, and that is what they are all saying outside, Secretary of State.

You can create a case study to back up the argument that you want to make, but that case study could also involve somebody transferring ownership seven years before death and then the IHT liability is zero. The best thing we can do is rely on the one place where we have hard data, which is from HMRC. These are actual claims that were made in 2021-22, the last year for which it is available. Look at the projections for how it rolls forwards and the vast majority of farmers will pay nothing.

We will hear from Henry, then Andrew, and then we are moving on.

Thank you, Chair, and thank you, Secretary of State. I want to touch on the devolved point of view, particularly from a Welsh perspective. We now have two Labour Governments working hand in hand, which is incredibly positive. Has there been an impact assessment, from an agricultural perspective, on how the Budget would impact people in Wales—from DEFRA and working closely with colleagues, with your counterpart being Huw Irranca-Davies, in this case? We know that in Wales, a greater percentage of workers in the agricultural industry speak Welsh than in any other sector in Wales. The figure of 43% of the industry is significantly higher than that in the population as a whole, which is 19%. I am interested to know whether there has been dialogue across Governments between you and Huw Irranca-Davies.

DEFRA does not carry out impact assessments on tax measures—that is just how it is. We can see what is going on in farming. I can see the low levels of profitability in farming, and many of the changes that we are looking to make are intended to boost the profitability of farming. I do not think it is a very good argument to say that you have farmers owning sizeable and valuable assets in land but, because they are not very profitable, they should not have to pay any inheritance tax when that land and that asset is transferred to the next generation in the way that nearly every other asset would be. The answer is not just to accept low profitability in the sector; it is to look at what we can do to drive up profitability in the sector. By using and protecting the SFI budgets and the other parts of the budget for sustainable food production, in the way that we have done in this Budget, we are helping to drive farmers towards more profitable, more environmentally and financially sustainable models of farming for the future, where their input costs will be lower and, therefore, their profitability will be higher. We are looking at what we can do to lower their energy costs and to use Government procurement—or public sector procurement, at least—to back British produce, as well as looking at what we can do to get a better veterinary deal with the European Union, so that we can get British food exports moving across the border into Europe as they used to. There has been a 20% decline in that since 2018. All of that will help to boost the profitability of farming. I think rather than just sitting back and saying, “Farming is not profitable,” and accepting that, we need to look at what we can do to boost their profitability.

I think we have been over that ground. Is there anything else that you want to ask, Henry?

I know we have already touched on a lot of that stuff. My question was more about the relationship between you and your counterpart in the Welsh Government, and looking at those discussions and how they are evolving over time, particularly in relation to the Budget. I know we have touched on the return on capital and so on.

Yes. I do not think it is appropriate to share the detail of individual conversations. I have had many conversations with all of the devolved Governments to make sure that we are working closely.

Who asked you to remove the ringfence?

Sorry?

Just out of interest, who asked you to remove the ringfence for devolved Administrations?

This is a Government that believes in devolution, and I think giving the devolved Administrations more control over their resources supports devolution. I think your party supports devolution as well.

Indeed—for many, many years. We believe in home rule, but you were not asked by the devolved Administrations to remove the ringfence?

No, but we were elected as the UK Government with a big agenda for devolution, so that is our mandate for that.

I agree very much with the points you are making. Within the £5 billion over the next two years for sustainable farming, of course, sits SFI. A lot of farmers have said that they have found it difficult to get into SFI, so we are simplifying it, making it easier to get into and increasing the number of actions that SFI will cover. I think it is going up to 120 actions from 20-odd—23 at the moment. That is a significant increase in what you can do with SFI money. It is intended to support farming to transition to more environmentally sustainable models, which are also more financially sustainable. If a farmer is farming in a way that is more regenerative and improves the quality of the soil, they do not have to spend so much money on buying fertiliser or, potentially, pesticides—depending on how they are farming—which are very high-input costs for farming. If we could help reduce input costs while protecting the yields, we can help farmers become more profitable. We are looking as well at what we can do on supply chain fairness. It is completely unacceptable that the producer of origin is so often forced to bear the majority of the weight of difficulties in the supply chain. We need to look at supply chain fairness, the Groceries Code Adjudicator, other adjudicators that are operating in the supply chain, the Agricultural Supply Chain Adjudicator, and how we can make the supply chain work more fairly for farmers. We will take actions like that, and I will not rehearse the others because, rightly, the Chair will tell me off for going on too long. We can boost farming profitability, and I think that is what we should be focusing on right now.

Everybody has to have the opportunity to have their say, and Tim Roca wants to come in. Keep it really tight please, Tim, and a very tight answer if we can, please.

It will be brief, Chair, because we have had a good discussion as farmers would expect us to, especially today—

Indeed, and that is why everyone has to have their say.

Thank you. I thank you, Secretary of State, as well for saying that it is important to listen. We have discussed tax planning implications for elderly farmers. We have talked about thresholds in some detail. Quite rightly, the Chair also raised the Rock review’s recommendations around tenant farmers. But this Budget had a lot of measures in it, and Andrew referred to some of them. I thought the disease threat money, the extra £200 million, was a positive step. Perhaps you could talk a little bit about that.

Yes. Biosecurity is essential to farming, isn’t it? We have seen issues already with avian influenza in Yorkshire—hopefully contained to that one incident because of rapid intervention. We have seen bluetongue, and hopefully, the very cold weather we have just got will help to deal with that. But by putting in restriction zones, we were able to contain that. We know from 2001, when we had foot and mouth, that that cost the economy £14 billion as a whole, and it was devastating for a lot of farmers. It is vitally important that we invest in biosecurity. I believe the Committee is due to visit the facilities at Weybridge. It is one of the first places I visited. You will see, as I did, that that world-leading facility—which helps to keep our whole economy and food supply safe, not just farming—is dilapidated to some extent and needs investment.

We are going to cover some of this later, so thank you, Tim. You may have saved us a bit time later; we will come back to it. We have finished the first section. Sarah, can you take us on to the environmental land management schemes, the Budget and direct payments?

Secretary of State, I will keep it fairly brief, but you were talking about farmers needing to forward plan, which is obviously very important. But farmers have to base that forward planning on the continuation of basic payments, and they had already planned based on expecting to receive them at various points. So why have you accelerated the transition away from the direct payments coming in, and do you not recognise the strain that that is also now putting on farmers?

Yes, of course I recognise the strain, but we had to plug that multibillion-pound black hole in the public finances—

The wider economic context we have really got—I promise you. I am not underestimating the importance, but we have got that message. We are running down the clock now. Would you please just stick to the question?

Yes, with that context understood, something in the budget therefore had to give. It was important to protect SFI because that is transitioning farming to a model that will be more environmentally and financially sustainable. Those are benefits that we want the farming sector to get, but also it is more nature-positive. This is one of the most nature-depleted countries on earth. Half our bird species and a third of our mammal species are at risk of extinction, so we need to transition farming to those new, more sustainable models for the sake of nature as well. SFI, based on all of those measures, offers good value for money. Basic payments don’t. Basic payments were due to end in 2027 anyway. We took the decision that, if something had to give, it was better to focus on that than on SFI, which is leading us towards the future. The approach that we took to reducing basic payments was to try to protect the most vulnerable farmers—so the smaller farmers who rely on that income the most have had the smallest reduction in their payments. The bigger farms that could afford it the most have had the bigger reductions. That struck me as fair and proportionate. There has been a big welcome in the sector, including from the NFU, for the way that we have balanced these two. The president of the NFU is perhaps not my biggest fan today, but he did put on record that he thought we had taken the right approach in the balance between BPS and SFI in protecting SFI.

Henry, do you want to come in on this?

Yes. How many applications have we had for SFI24? You combined the mid-tier countryside stewardship with SFI23 to come out with SFI 24.

My colleague, who has a head for detail, is here with me. She will give you the exact numbers.

Thank you. I am Emily, director general for Food, Biosecurity and Trade at DEFRA. We have had 16,500 expressions of interest for SFI24, of whom 15,460 have been invited into the service. As for actual submitted applications, we have had 6,800, more or less, and so far, we have offered agreements to 3,500. We are getting about 450 to 500 applications a week.

How quickly are you handling that? What is the speed looking like?

The average performance is about 22 days for turnaround, but that is an average. We have some cases that have been around for much longer. Some have waited for more than three months, and we are trying to reduce that at the moment. The average is 22 days. That compares to countryside stewardship before, which was about six months for the turnaround time.

What is the speed of handling for questioning from the RPA?

For SFI, mostly what is happening is, I think, that one action that requires additional checking from another body, but the RPA is largely putting this through their own systems and then making the agreements. There had been a situation in August and September when manual checks were going on, but that has now been automated, so that is going to be swifter now.

You do not have the figures as to how long that is taking, in terms of the questioning put to the Rural Payments Agency.

Perhaps you could write to us with the answer because we are getting into quite granular territory here.

If you could clarify what you mean by questioning, I will pick it up with you afterwards.

Okay. Thank you.

I do not suppose we know much of a breakdown of who is applying for those payments. Is it the small farmers or the large farmers? What will be the impact on family farms of the changes with basic payments?

I do not have that information to hand. I can go and find out what we have.

Perhaps you could write to us with it.

It is quite important to look at that impact going forward.

It is open to all farmers.

Would you like us to send that information to the Committee or to the individual member?

If you can send it to the Committee—

Yes, sure.

—we will disseminate it. Be aware that we would expect, with the agreement of the Committee, to put it into the public domain.

We are talking in the next session about the advisory services that help farmers to do that, because that is really important.

Yes, I can say something about that as well, if you like.

Briefly.

At the moment, we are spending £20 million on environment advice and facilitation. We have also put £17 million through the farm resilience fund, which then also gives money to charities, which can help farmers.

On the higher-tier countryside, can you give a bit of an explanation—because I believe it is closed, and it is being run by Natural England? Is that right?

On the higher tier, Natural England offers advice and then the Rural Payments Agency makes the payments.

Let us move on to future developments and farming.

It is interesting to see the figures for SFI. It seems to have picked up after a very slow start, but it seems that farmers are still not incentivised to move into these schemes. Given the news in the Budget, I think that is a really interesting dilemma that farmers are going to face over the next couple of years, as they look to invest in their farms, particularly as we are looking at young farmers coming into the industry. What steps is the Secretary of State taking to optimise the ELMs schemes, and what is your vision beyond ELMs as we transition into modern farming? My interest is particularly in how we are going to get farmers to invest in farming in the future.

I think you heard earlier—so I won’t repeat all of it—that we are trying to simplify SFI, so that it is easier to get into, particularly for those farmers who have told us that they found it very difficult to get into in the first place. We are also dramatically increasing the number of actions that you can get funded by SFI from 24 to 102 actions, I think, in the expanded SFI that is now available and that people are applying to. Simplifying and expanding SFI helps. We are also working on a farming road map. The original intention of the ELMs schemes—we supported this at the time, and I support it still—was to help farming transition towards models of farming that are more environmentally and financially sustainable into the future. You see a lot of farmers at the cutting edge of this who are really demonstrating how it can be put to maximum effect in making that transition. Not all farmers are going on that journey yet, so we are looking at what we need to do to make the SFI schemes and other ELMs schemes more accessible and effective at supporting farmers as they go on that transition. I am very interested in looking at how we can support those farmers in the sector already who are pioneering these approaches, and help them to bring the rest of the sector with them. Farmers are much more willing to listen to other farmers who are already doing something well than they are prepared to listen to politicians, civil servants or Government Departments. I am very interested in models of co-production and how we go on a journey towards transitioning farming. There are other things we can do to support farmers in that. We will be publishing a land use framework within the next few weeks or months, as soon as we can get that out of the door. That will help, because it will give the whole sector a better sense of how we want to balance nature’s recovery with food production and to protect food security, while also protecting nature. Some of the planning reforms that my colleagues in the Ministry of Housing, Communities and Local Government are leading on are intended to speed up the planning process so that farmers and landowners can get a planning decision far more quickly. That makes an investment a much more attractive proposition, because they can much more quickly realise a return. I was very struck when I was told by a landowner/farmer that it took them nearly 10 years to get planning permission to link sustainable energy generation to the national grid. It should take months, if that—not years.

Secretary of State, do you feel that farmers will feel incentivised to innovate, given the decision in the Budget?

Yes, I do, because most farmers will not be affected by it. I have already explained—I won’t do it again, because the Chair will rap my knuckles—the various interventions that we have to help farmers become more profitable and to incentivise them to invest, because they will get a return on that investment faster.

The current ELMs system is quite pick and mix—farmers can choose what they apply for. Are you thinking of moving towards a system that may have more of a balance, so that when we have that land management system, we know what we are aiming at and we can assist farmers with knowing where they should put that investment?

Farmers having discretion in this is important, because people are much more willing to go on a journey if it is a journey they want to go on. If there was a sense of coercion, I do not think that would happen. But I also think that sensible business owners of any kind, including in food production and farming, want to know what the strategic direction is that the Government want to go in as well. Publishing a land use framework—as we will do probably early in the new year—will give farmers a much better sense of how we intend to balance our ambitions both for 30 by 30 and nature’s recovery with food security, food production and a thriving food production sector. Currently, without a land use framework being published, people have to guess what our approach would be. With the land use framework out there, people will be able to interrogate it. We will not publish the land use framework cold. We will go out to consult on the best way to shape that land use framework, so that everybody who has a stake in what it looks like can influence the final shape of it. Again, for me, co-production is a very important part of the approach we want to take, so that farmers, food producers and growers feel involved in the decisions that will affect them.

So that money does not all end up in things like biodiversity banks, for example.

All of which takes us on quite neatly to questions on land use and food security.

You started to address the point, Secretary of State, about consulting stakeholders over the framework. How do you see the balance in competing demands for land use?

We need co-ordination across Government to get this right. Within DEFRA, early in the new year, we will publish a consultation on the land use framework that will look at how we balance nature’s recovery with food production. Those are the parts that DEFRA will be responsible for. There are other spatial strategies in Government that the land use framework will have to work in tune with—the spatial development plan the MHCLG is developing, and the spatial plan for energy infrastructure that DESNZ will be working on. They are separate but interrelated frameworks, and if they do not correlate with each other, they will not be maximally effective, either individually or collectively. The Departments are working together to make sure that each of these frameworks takes all of the others into account so that we can make the best use of the limited amount of land that we have for the size of our population, and the many demands that we want to place on that land. It is far better to go ahead with visible frameworks that people can influence than the current model, which allows everything to be randomised. I do not think that gives you the best outcomes.

Does that mean the framework will identify multifunctional compromises clearly between those Departments?

I think it will have to, because in some cases, the same land is used for multiple purposes. But at least by going out with these consultations and developing these strategies, and by defining what it is we want to achieve, we are much more likely to be able to achieve it. I will make a more general point. I am talking about a number of frameworks that are being developed here—the farming road map, the land use framework that we touched on, the circular economy at one point, and there is the water commission as well. It is not very often in the cycle that you get all these new agendas being developed at the same time. There is an opportunity for my Department and the Select Committee to work together on that to influence the agendas. They are almost like interlocking pieces of a jigsaw; they are not separate strategies. They combine to make sense of what we do with our land as a country, the natural assets in our country, and how we use them for the benefit of the entire population. For me, this is quite an exciting moment, and I would very much welcome the opportunity to partner with the Select Committee in developing these agendas.

The points you make are very important. If anyone was not aware that food security is national security, what happened in Ukraine, in the Red sea and during the pandemic would have shown them that it is. The answer is not to close the borders and try to produce everything we want to eat in this country, but we need an appropriate level of domestic production that balances with secure supply chains for some of the food that we cannot or do not want to produce in the country. Perhaps over time the balance will change. Supply of food that is secure and resilient is essential to food security—that is both domestic and international supplies. It is about the quality of the food that we are accessing as well; there are good calories and bad calories. You can fill yourself up on food that is not nutritious. If we are doing that as adults, that is our free choice, but if that is happening to children and it is damaging their physical and mental development, we would all be concerned about that, both as parents or as people who want to see the rising generation succeed. Of course, we want high-quality food to be affordable to people as well. All those things have to be taken into account in looking at what food security is. There are then the impacts of the climate crisis, and we have seen the flooding in Spain. Happily, it does not seem to have affected the food production that we rely on, but it has been absolutely devastating to people living in the towns, villages and cities that were affected. We also have droughts damaging food supply, and of course, flooding and droughts affect food production in our country as well. One of the things I was pleased about in the Budget was that we have found £60 million to help farms that have been devastated by flooding earlier in the year to be able to recover. But we need to look more at how we can help to protect food production domestically from some of those severe weather incidents that happen much more frequently today. And on international supply chains, it is important that the supply chains that we are relying on are secure and reliable. All of that comes into food security.

What is the definition of food security? What are the metrics that you are measuring in order to know, so that one day we can say that we are food-secure?

We have the food security reports that will be published in December. That will give you a hell of a lot of metrics around what food security looks like.

That is the route you are following? I recall you were not massively impressed with it in the past.

Well, there is a whole load of data in there and that is what we will be looking at. At the core, food security is about a secure and resilient supply of good-quality, accessible, affordable food. But there are so many metrics that will come into that, you will need to give me time to—

But we need to maybe reduce the imported—

You will need to give me time to pick out the ones that I think are the most important. Imports will play a part in food security. I do not think we can seek to become, and we never have been—

I have spoken often about the Orkney avocado harvest.

There was the recent announcement at COP about the 81% reduction in emissions by 2035. The Climate Change Committee said that can be achieved only with a significant reduction in the production of meat and dairy. Has that been taken into account, and is it now part of the long-term food security plan to see a reduction in overall domestic food production?

People should, and will, make their own choices about what they want to eat. It is not for the Government to tell people to eat this, or do not eat that. In my experience, what people want is good-quality information to help them make the best possible choice. I forget the name of the report, but in about February of this year, a report was published into the health of our children, and our children are becoming shorter, fatter and sicker compared with previous years. A large part of the reason for that is because of the food that they are eating. No parent would choose to make their child shorter, fatter or sicker. The parents are not getting the information they need to make informed choices, so I am very interested—

Meat and dairy do not make you short, fat and sick.

I am very interested in what we can do to provide more information to consumers to make their own choices. I am not interested at all in the Government telling people what they can eat.

Specifically on trade deals, I was very pleased that we had a line in the manifesto that ruled out trade deals that undercut farmers on things such as welfare and environmental standards, in the way that the Australia and New Zealand trade deal did. That was catastrophic for farmers and there will be no more of any of that from this Government. On your wider point, what we do not have as a Government is a food strategy. We have started to talk to colleagues in other Departments about how we can work towards that. It is in the very early stages at the moment, and it is another area where I am sure the Committee will want to take an interest in and may wish to contribute. Henry Dimbleby, who I am sure is known to many of you, promoted the idea of a food strategy, and he will tell you that if you do not have a food strategy, that is a food strategy—it is just a very bad one. It is one of the things that is leading to our children becoming sicker and less healthy than they used to be, with all the damage that that does to their life chances. I would rather we had an explicit food strategy that was focused on delivering the outcomes that parents and members of society would wish to see for themselves and their families. That is something that we will work on. It is at a very early stage at the moment, but it is another of those agendas where I think we could make a big difference.

We have done the difficult stuff; we will move on to the water sector now.

I get the water sector part, because Cornwall is surrounded by water on three sides. The Government have announced a major review of the water sector, and the first thing to look at will be the scope. How wide is it? Would the review consider alternative models of water company ownership and maybe complete reform of the regulator? Will it be that broad? When will it report, and how will it fit into the Government’s overall strategy for the water industry? Will this be part of a very long-term set of measures, or is this the be-all and end-all?

I am worried that the Chair will ask me for a short answer to that huge question.

Sorry, I have loads more.

I will try to keep it as concise as I can. The commission that Sir Jon Cunliffe is leading is part of a wider strategy. We took the first steps towards that seven days after the general election. I had the chief executives of the water companies in my office, and we agreed an initial package of voluntary reforms. Those included changing their corporate objectives to put customer and environmental interests at the heart of the decisions that they are taking, and also to ringfence money that is earmarked for investment, so that it cannot be diverted for payment for bonuses or dividends. The public want that reassurance. I was very pleased that the water companies agreed to do that voluntarily because they understand—as I understand, and I am sure we all do—that there is a crying need for a reset in the water sector, because of the high level of public anger at the state of our rivers, lakes and seas and the record levels of pollution in them today. So there was an initial set of reforms straight away. Going through Parliament right now is the Water (Special Measures) Bill, which takes action on some of those unfair bonuses that water chief execs were awarding themselves for overseeing failure. There are other measures in there as well. I am happy to go into those if the Chair wants me to, but I will move on if not.

We have all been in the debate.

The third stage of these initial reforms was to invite Sir Jon Cunliffe to lead a commission that will look at the water sector in its entirety. That is looking at governance, regulation, how the water sector is structured and how we can move to catchment-based approaches to water management, so that we can see all of the factors that are influencing pollution in a particular catchment and then tackle them collectively so that we can clean up our water. About 40% of what goes into the water as pollutants comes from agriculture, about 50% comes from sewage, about 10% is from highway run-off, and there will be other smaller sources as well. We have to tackle all of them. We have charged Sir Jon with looking at the entire sector, to reset it. It is the first time in 35 years since privatisation that this has been done. Sir Jon is a very good choice to lead the review. He was the Deputy Governor of the Bank of England and the second permanent secretary in the Treasury. He understands regulation and investment, and he has a high level of credibility. We want an investable water sector that works for customers and the environment, and that is what he has been charged with doing.

Everything is on the table there, so governance, regulation—everything?

I will come to a couple of your other points. When will it report? It is intended to report in June next year. The Committee may wish to make its own submissions to Sir Jon on the work that he is doing. In terms of ownership, we are looking at how we reform a privately owned, regulated water sector. We are not looking at nationalisation. That is ruled out because the costs of doing that would be absolutely prohibitive—upwards of £100 billion to buy out the current owners. It would take years to untangle the current models of ownership, during which time water pollution would get worse, because the companies would have no incentive to invest in cleaning up the water. I genuinely do not believe that the problem is ownership, because there are nationalised water companies that have similar problems with pollution to privately owned water companies. The failures are failures of regulation and governance. We have charged Sir Jon with looking at that and coming up with a new model that genuinely will be a reset moment for the water sector in this country, so that we can get it delivering for customers and the environment in a way that it has not done in recent decades.

Ofwat is looking at a price review for the water sector. Obviously, we know that, over the previous years, a lot of money has been taken out of that sector with not much investment. To what extent should consumers now have to shoulder and take on the up-front capital costs, which will be large, to tackle water pollution and ensure that water is secure for the future?

Whatever happens, the consumers will not be taking on the up-front capital cost, because the purpose of the review is to bring in investment from private sector investors into the sector, who will then be looking at a long-term, low but fair return on that investment. That is how we can keep customer bills affordable during that process. Based on the figures in the draft determination—which may change by the time we get the final determination from Ofwat in December—that is upward of £88 billion coming on stream from April next year to start investing in our broken water infrastructure. That is how we start to clean up the pollution.

Have you had expressions of interest from investors to doing that?

Personally, no, because it goes through the water companies. But I have had meetings with the Financial Secretary to the Treasury—Spencer, as I know him—with the investors at roundtables to understand their concerns about investability into the sector. At the growth summit at the Guildhall, we again met investors to understand what they are looking for to make the sector more investable. There are plenty of investors out there who want to invest in a well-regulated and successful water sector. The work that Sir Jon is carrying out to get proper regulation into the system also makes the sector more investable, because investors want to invest in an enterprise that is succeeding for their customers. They are not happy at all about the state of the water sector, the state of pollution and the state of public anger about that. Those are failures of governance and regulation that we as a Government can help to correct, and that is why I have charged Sir Jon with carrying out this work.

So it is a case of “fix it and they will invest”?

Yes, the two things go hand in hand because we need that investment coming in, in April. Out of interest, even at £88 billion—and it may change—that is the single biggest investment in the water sector in the history of this country and the second biggest private sector investment in any part of the economy for the entire lifetime of this Parliament. It is a very significant piece of work.

I have quite a lot of questions about water. There is a lot of pollution in our inland water, as well as our coastal areas, but it is from different things. It is partly from sewage, but also from agriculture, industry and landfills. What steps are you taking to tackle all of that different pollution?

That is a huge question. I will not repeat what we will do on sewage, because the amount of investment that we are hoping will come in from April is how we start to fix that, alongside the work that Sir Jon will be leading on the reforms of governance and regulation. On agricultural run-off, I referred earlier to the farming road map. We want to work with farmers, so that farmers are leading these reforms, but if we can support farmers to move to more regenerative models of agriculture that require less fertiliser to be dumped on poor-quality soil, and fewer pesticides dumped on crops, we will reduce the run-off into water. There are other things you can do as well—what you grow up alongside the rivers, the barriers that you can put in, the buffers to stop things running off. But by reforming agriculture, we can reduce the run-off in that way. On landfill, we have not spoken very much yet about the circular economy; that is another of our big priorities in the Department. There are so many benefits from moving to a circular economy. One of them, of course, is that we will have far less landfill—far less waste going into landfill. I would much rather we find ways to reuse materials than we incinerate or bury them in the land. A circular economy is a very big priority for the Department. It also happens to help grow the economy, so there are many reasons why it is right that is one of our priorities.

Can I carry on with the last couple of questions, Chair?

Can we do another two minutes, and then I want to move on to biosecurity?

Water resilience is the next thing—so drought, flooding, and disrupted water supplies, of which we have had quite a lot lately. What are the Government doing to tackle those three things, which are obviously very different?

It links back to that investment coming in. Frankly, water infrastructure in this country is in an appalling state, and that is why we have record levels of sewage. It is also why you have the problems in Cornwall, where last year, you had both the hosepipe ban and flooding at the same time, because the infrastructure cannot capture the water and then get it to where it needs to be. It is constraining growth in areas around Cambridgeshire—house development cannot go ahead because the clean water infrastructure is not there. In Oxfordshire, the absence of sewerage is constraining growth. We want growth. Growth is the top priority for this Government; it is how we get the money to fund our public services to give this country the wage rise that it needs. Water infrastructure is critical to all of that. The money that we intend to bring in, through the conclusion of the PR24 process and the reforms to governance—as I say, upward of £88 billion—is how we get the new infrastructure built. To leave you with a little teaser, I think the Thames tideway tunnel is a really good, interesting example of how a collaborative approach to developing water infrastructure can happen with a slightly different ownership and governance structure. It is a huge project delivered on budget and on time, and there are a lot of lessons in that for what we can do for other major water infrastructure up and down the country. I am drilling into that in my role. It may be something you are interested in looking at as well.

We are seeing Ofwat next week for an evidence session, so we will maybe pick up some of this in more detail.

Can I ask a question on enforcement?

A very short question.

I appreciate that it is different in Wales and England with the Environment Agency and Natural Resources Wales, but Natural Resources Wales is only progressing with enforcement on 4% of incidents reported. That is obviously very low. I do not know what the figures are for the Environment Agency, but I am interested to know what the Department is doing to bulk up that enforcement.

There are some measures in the Water (Special Measures) Bill—which is going through the House of Lords now and should be in the Commons very soon—that will strengthen enforcements by claiming back the costs of enforcement action from a successful prosecution against a water company, so that it generates more resources to carry out more enforcement. So that is in the Water (Special Measures) Bill. More widely, I have asked Dan Corry to lead a review of DEFRA regulators. There are some overlaps in the functions of some regulators. Over time, organisations can potentially lose sight of their initial objectives and start doing other things. I want to make sure that DEFRA’s regulators are fit for purpose; that they are carrying out the job they were intended to carry out; that there are no overlaps that are confusing the regulated, in terms of what the regulator is doing; and also that they are promoting the Government’s growth agenda. What I do not want to happen is regulators getting in the way of the primary mission of this Government. So that is another piece of work that I think will start to touch on the question that you raised, Henry.

Let us move on to biosecurity.

I will try and rattle through this, Chair. I think we would all agree that this area is very important. I will start off with the border target operating model. Can I get your assessment on the implementation of that, particularly around the operations at Sevington?

It is still bedding in, isn’t it? It is an intelligence-led model, it is risk-based, and it is contingent on the deal with the European Union that is not yet fully operating in the way that it should be. We have a watching brief on that; that is probably the best—

Is it your impression that things are improving? I have heard various anecdotal stories about not just livestock, but plants, flowers and so on.

What do you think, Emily?

I think it is improving. Before this job, I was chief executive of the Food Standards Agency, so we obviously had quite a key interest in what was going on at the border there as well. Some additional things have been rolled out in the last few months. For example, in October at Sevington, they intercepted 34 consignments of plants infested with a fruit tree pest. So they are catching things. The timeliness of things going through and being picked up is improving. We occasionally still get consignments that are stuck and need to be progressed through, and that feedback loop to the Port Health Authority and beyond needs improving. But we are getting there.

I think we had the same issue in reverse when the implementation checks came in on the EU side. We had a rocky few months, but it smoothed out in time. I will move on to an area on which I have spent the last two-plus years lobbying the previous Government, around biosecurity on our borders and organised crime, including the imports of illegal meat products in large volumes. Dover, in particular, has some great insight on that, yet they do not have the necessary funding to police the border as they would choose to, as a Port Health Authority. I know that is the same with other Port Health Authorities. Has there been any progress, any news on that, in terms of being able to secure the funding?

There has been an allocation for this year. We have not agreed yet what we will give them for next year, so I cannot report that yet.

Are they satisfied with the allocation for this year?

I do not think Dover will be satisfied, because I think they will always feel there is more to do, and that is true of any enforcement authority. But we will do our best.

But it is one we are very aware of as well, particularly African swine flu and illegally imported meats from certain countries in Eastern Europe, in particular. There are real concerns about that, so that is something we are keeping a watching brief on as well. We will see how that situation develops.

It is crucial because, as you say, it is countries with African swine flu that are not able to export their meat products at the moment that are being exploited, and this meat is coming into the country. I appreciate that you cannot stop every vehicle without bringing the whole thing to a halt, but anything we can do to try to prevent that meat coming into this country would be greatly appreciated. Finally, I will move on to Weybridge. We are due a visit there shortly. I am sure we are all acutely aware of the funding that it requires for a full rebuild. There was £200 million allocated in the budget. Are you still making representations to the Treasury to get the extra £1.4 million that you will need after that?

For all the reasons that you will be aware of, it is essential that we maintain the world-leading status of the facilities at Weybridge and the APHA. It is about national security—it is as important as that. The devastation that happened from foot and mouth cost the country £14 billion, and for the farming sector, there was a disproportionately heavy impact. We have secured the £200 million, as you said, and stage two of the spending review is about to start. We will have conversations across Government and with the Treasury about that, but, of course, I will be making representations around biosecurity.

A couple of people want to come in on this issue, and I am determined that Josh Newbury—who is my favourite Committee member, a model for everyone in sitting patiently—will get some time. Secretary of State, I understand you can maybe give us another 10 minutes or so. We have questions on fairness in the food supply chain and a couple of points to finish, and then I promise we will be done for today.

You are only saving me from the media, Chair.

Andrew and then Sarah—very quickly.

One of my biggest weaknesses.

Sarah’s question leads on naturally from that, so I will take them both together.

I particularly want to know about the assessment you have made of vet shortages and how you will work across Government to tackle that problem. How will you achieve a potential veterinary agreement with the EU?

Shall I take the workforce one, and then you can talk about the veterinary agreement?

I will take the vet deal, yes.

There are two things. One is that there has been money to Port Health Authorities, which has meant that they have been able to recruit more people. Nevertheless, I think—partly from my previous experience—that there is a shortage of environmental health experts in the country, and I think that is a strategic issue that needs addressing. There is a workforce planning issue in the round about environmental health and that expertise, some of which is used at ports. That goes the same with vets. The Food Standards Agency uses a lot of vets, as does the Animal and Plant Health Agency. Having been at the FSA, I now find myself in the post I was lobbying to try to get someone to do something more about vets, so it is now my responsibility to solve this as well. Because of a number of factors in the last five years or so—additional export health certification work, the pet boom that has happened, and then issues about retaining vets in their professions—there is pressure on vets, which means that we are seeing salaries go up, and it can be harder to get vets into the public health world that we know, in particular. We need a strategic approach to that, and there are proposals from the Royal College of Veterinary Surgeons around a veterinary surgeons Act, which would make a significant difference. It is up to the Government to decide if they want to pursue those proposals and then to get parliamentary time.

We have heard about these proposals for many years—possibly decades—from the RCVS.

At least for some years.

On some future occasion, we might ask you what you are going to do about it, but not today. Secretary of State, do you want to add to that?

On seeking an SPS deal with the EU, we were clear through the general election that this is something that we are looking for as part of our reset of relations with the EU, so that we have a stronger and more collaborative relationship with the EU—short, of course, of re-entering the single market and the customs union, or returning to free movement. But I think it is in the interests of both sides to smooth relations and to smooth trade. Food exports to the EU are down 20% since 2018. That has had a big hit on many food producers and growers, and they want the Government to correct that, so we now have a Cabinet sub-committee on relations with the EU, which I attend to speak to issues related to the SPS deal. The negotiations are being led by my colleague, the Cabinet Office Minister responsible for EU relations. We will be looking at a deal that gets our food exports moving across the border again, but which also protects the interests of our food producers on land and in sea here at home.

Thank you—I call Josh.

I appreciate it, Chair. I would like to move on to fairness in the food supply chain, which I think affects all our communities. Post the Budget, lots of supermarkets—Sainsbury’s, for example—have said that particularly the increases in employer’s national insurance and the minimum wage could lead to increased food prices for consumers. What assessment has DEFRA made of the potential for that and of the impact that it might have?

I will be speaking at the Food and Drink Federation’s investment summit tomorrow. I am looking forward to it very much, because we have one of the world’s most vibrant food and drink sectors. It is extremely competitive. That is one of the ways that we manage to keep both the variety of food products high and the costs very competitive, and I think that will continue to be the case. We are looking at a number of things to do with supply chain fairness through the whole system. Too often, the supply chain does seem unfair to the producer of origin. Producers will very often tell you that they have been forced to sell their produce at below the cost of production. That is absolutely not sustainable and it is one of the reasons why, earlier in the session, we were talking about the low profitability in the farming sector. We need to do something about that, so we are looking at the Groceries Code Adjudicator, and how we can strengthen it to intervene as appropriate to ensure that the supply chain is operating fairly. Similarly, the Agricultural Supply Chain Adjudicator carries out a similar role, but we also have the new fair dealing obligations regulations. They are focused initially on milk, where some abusive relationships were really damaging milk providers, but that will now move on to look at other sectors—I think pork is the next sector. We will seek to roll that out, but we are absolutely committed to making farming more profitable and supply chains fairer for the producers of origin. We depend on them for the food we all enjoy, and we need to do what we can to support them in the supply chain.

I welcome what you said about that. You talked earlier about the proposed changes to public procurement—leveraging the power of the public purse in supporting British producers—but how will you make sure that not just wholesalers but farmers benefit from that, and particularly smaller farmers? I came from the NHS before I entered Parliament, and the NHS often reaches for big contracts with big producers and big companies. How will we make sure that that filters down and benefits our farmers? On the Groceries Code Adjudicator, you will be aware that the NFU is calling for the threshold to be lowered to £500 million from £1 billion. When I asked a parliamentary question on that, the Business and Trade response was to state the facts rather than to say whether an assessment had been made of the merits of lowering the threshold. I would welcome anything you could say on that.

Let me look at the thresholds. I am not sure whether that is within DBT or DEFRA, but I can get back to you on that. Within public procurement, the Government spend an awful lot of money on buying food in the public sector in one way or another—food for our hospitals, for our prisons and for other parts of the public sector. It seems right to set the ambition to have 50% of that procurement spent on food that is locally produced and more sustainable, because it then encourages farmers along the farming road map to models of farming that are better for them financially, as well as for the environment. That is something we will want to do—so local will specifically be in those requirements when we bring them in.

Will guidance be issued to public sector procurers on how to make sure that local producers are benefiting and that we are looking at things like fairness in the food supply chain? You talked about how in the past and currently, some supermarkets have not treated farmers fairly. How will we make sure that that is not replicated through the public sector procurement? It goes on already at the moment, but if we are talking about a massive expansion, how do we make sure that our British farmers are benefiting from that?

We will be putting the procurement rules together for how that will operate. Being local and being sustainable will both be factors that are required in that process, when we develop it—so we will develop it in that way. I am sure from your questioning that it is something the Committee will be very interested in looking at, when we bring that forward perhaps in draft form. That is something that we could work together on to make sure it works in that way. Promoting local producers is very important, so that you do not get these big juggernaut buyers riding roughshod over them. It is very important for regional economic growth, which is something that we want to promote as part of the growth mission. It ticks all sorts of boxes. It is not just about food security; it is about economic growth as well, and healthy nutrition.

Secretary of State, there is other stuff we would love to ask you about—fisheries, the circular economy, some of the cross-cutting work—but to encourage you to come back at a future date, I will not abuse your good nature by asking you to offer us another 10 minutes. We have only used six of them. We are very grateful to you for your engagement and your attendance today, and to your colleagues—David, we will think about questions for you at a future date. I am sincere when I say that I want this Committee to be something which, through robust scrutiny, is able to add value to the work that you do, because ultimately, that is where the best interests of all our constituents—particularly in rural communities—should lie. Thank you for your attendance, and thank you for your co-operation to date.