Good afternoon and welcome to this meeting of the Environment, Food and Rural Affairs Select Committee. We return to our ongoing inquiry today in relation to the work of the Department and its arm’s-length bodies. We are delighted to have with us this afternoon the Secretary of State and a coterie of minders and advisers. Emma, just for the benefit of the official record and for those who are following our proceedings, can I invite you to introduce yourself and your colleagues to the Committee, please?

I am Emma Reynolds. I am the Secretary of State. If I could let my colleagues introduce themselves, that would be nice.

David Hill, Director General for Strategy and Water.

Emily Miles, Director General for Food, Farming and Biosecurity.

Emma Bourne, Director General for EU Reset and Trade.

Thank you all very much. Your attendance is very much appreciated. We have a fairly wide-ranging agenda, and I know that you have a hard stop today, Secretary of State. We are going to start off with some questions around the reforming of the water sector. Terry, you are going to lead the questioning for the Committee on this, please.

Thank you very much for joining us this afternoon, Emma. As you will no doubt be aware, we have spent a lot of time as a Committee exploring the huge number of issues facing the water sector. Frankly, there have been times where we have been genuinely shocked by the evidence that we have heard. I think it is fair to say the state of the industry is not good, and it has been a pretty fascinating and concerning period for us through the work that we have been doing. One of the most shocking periods was our scrutiny of Thames Water in particular, which rumbles on. The creditors continue to negotiate with Ofwat more than a year on through the process, and there was a freedom of information request recently that showed that £15 million a month is being spent on lawyers and advisers. I am obviously acutely aware of the ongoing legal process. You have said that the creditors’ proposal does not sufficiently protect customers or the environment. Is it time to accept the view that, in relation to Thames Water, it is time to bite the bullet and place it into a special administration regime?

I will come to your question, but just to reiterate to the Committee why I presented early views on the current proposal from the creditors, I was worried about the unfair cost to the customer. As you know, it is the biggest water company in England in terms of number of consumers—16 million customers. I was worried about delays to infrastructure improvements and about delays to environmental improvements. I just want to put that on the record. The Government want to make sure that whatever happens delivers the best outcome for consumers and the environment, and that is overall what I always come back to. To slightly challenge the way that the question is sometimes put, which is that somehow the Government have the power to put Thames Water into a special administration regime, that is technically not correct; it is a court procedure. There are two different types of SARs: an insolvency SAR and a performance SAR. Regardless of which SAR it is, it would have to go to a court, which would have the final decision as to whether the company would then be in a special administration. I just qualify that. On an insolvency, obviously there would have to be evidence that the company is insolvent. With regard to the performance SAR, there would have to be a serious breach of a company’s principal statutory duties or a breach of an enforcement order, so that it would be inappropriate for the company to retain its licence. That is the legal framework. Where we are in the process is that I presented my early views. It is now for Ofwat to decide what its view of the current proposal is. My officials and Ofwat continue to discuss the issues of concern with the consortium.

I think it is probably reasonable to assume that, as time goes on, that SAR process is likely to happen one way or the other. Could you confirm what preparations your Department is making should Thames Water become insolvent?

We stand ready for all eventualities, including a special administration regime. We have done preparatory work in case that is something that transpires. At this stage in the proceedings, as Environment Secretary, given the legal constraints I am operating within, I am open to what Ofwat says—it is the independent regulator—but I am also open to what the consortium might come back with. That is where we are in the process.

We have heard fairly shocking testimony about repeated warnings from regulators being ignored by water companies, and the Government have chosen not to apply for the SAR in relation to performance, despite multiple licence conditions being broken. What do you think it would take for you to use that power?

As I said, there has to be a serious breach of the principal statutory duties. The statutory duties are providing safe drinking water and providing wastewater treatment services. There is an enforcement order in place against Thames. Maybe you could talk about the detail on that, David.

There is one enforcement order in place with respect to Thames relating to wastewater treatment compliance. With that order in place, it has to comply with certain additional obligations that the regulator places on it. That included submitting a plan to the regulator for how it would address that enforcement order. It did submit that plan last November, so the company is not in breach of that enforcement order, and it is working with the regulator to meet its obligations under that order.

I think it is fair to say it is not just Thames Water that has concerned us as a Committee. Two evidence sessions that were particularly concerning were with South East Water. Is it close to the threshold for the performance SAR?

With regard to South East Water, again just to explain the background before I come to your question, obviously I am very disappointed that it has repeatedly failed in its statutory duty—and it is a water-only company—to provide drinking water to its residents. We have had the case late last year, we have had the case in January, and obviously the more recent case as well. Thank you for the work, Alistair, that you and your Committee have done on this, because we now know, due to the investigation of the company into itself but also your proceedings, that those incidents were preventable. It is clearly unacceptable for that to be the case. Back in January, I think it was, when I visited Tunbridge Wells, I called on Ofwat to consider looking at the licence conditions for the company because I thought it was such a serious issue. It was not a one-off and it did not just happen for a day or two; it was a sustained period and it has happened a number of times, as I have just set out. The company has since removed the chair, and the chief executive has resigned. It has recently appointed a new chief executive designate, who I think is due to take over in the coming weeks. Essentially, if the Government or Ofwat were to apply for a company to be put into a SAR, it would have to be in serious breach of its principal statutory duties or an enforcement order. Can you say something more about South East Water, David?

The only thing I would add is, as the Secretary of State said, and as I think this Committee heard from the chief inspector of the Drinking Water Inspectorate, Marcus Rink, the DWI investigated the incidents at Tunbridge Wells. It concluded that the incidents were foreseeable and preventable and, as a result of that, DWI has placed South East Water in what it refers to as “transformation”. That means the company is now undertaking intensive work with the DWI around the root causes of its poor performance and to ensure that the remedial action to address its poor performance is reflected in legal instruments. It is in an intensive programme of work with DWI to turn around performance. In addition, Ofwat published its consultation in March on its investigation into licence breaches around obligations to maintain a resilient water supply. You will know that Ofwat has proposed, subject to that consultation, a £22.5 million fine for the company. There is a live and further Ofwat formal investigation, which was launched in January, into whether South East Water has complied with its obligations around customer service. That is the first time Ofwat has launched such an investigation under the new customer focus licence condition. I would characterise the company as being at a phase where it is subject to further intensive performance management and oversight from regulators. That prefigures, to some extent, the measures announced in the water White Paper about creating a strength and performance improvement regime for water companies. In respect of a SAR, if the Government were going to make an evidence-based application, the court would have to consider all the evidence, including these further steps that regulators are taking to try to address some of those underlying performance issues.

Can I add something I have done recently, just to update the Committee? In addition to the Water Minister, Emma Hardy, meeting the company last week, I have also very recently—and apologies, Alistair, I need to send you copies—sent letters to South East Water and to the regulators with regard to these disruptions, setting out to South East Water my expectation that it will openly engage with regulators and have a credible improvement plan and that there should be evidence of progress and a written update by August this year, and to the regulators at Ofwat, DWI and the EA asking them to set out what their collective approach is to improving the performance of South East Water.

I am pleased you recognise that with South East Water it was foreseeable and preventable. We established that very quickly as a Committee, and it was very clear. It was also clear it is not about individuals, and I am sure we would welcome the change in personnel but actually there was a more systemic issue within the organisation. There are very limited safeguards for protecting customers from poor performance. I appreciate the improvement plan is in place, but the performance SAR is one of the very few limited safeguards that exist. If that improvement plan is not followed, will the Government consider the performance SAR? From a South East Water customer point of view, we heard quite harrowing testimony from people who are, frankly, probably living in fear. It is hot this week; it seems to be a trigger for lots of the issues in that particular area. They want to have some reassurance that the Government are going to come on their side and make this company improve.

We are on the side of customers. We obviously have to be a little careful in how we talk about individual companies and the prospects for SAR in the future, given that that can have an impact on their valuation if they are listed and, if they are not listed, on the way that they raise money to invest in turnaround or in other infrastructure. That is why I am a little nervous to go on the record with regard to that. We stand ready for all eventualities, including a SAR, but when there is a failure, I think it is right and proper that companies come to the table with the regulators—that they put forward a turnaround plan. With the Clean Water Bill that we are introducing later this year, there will be a performance improvement regime, which is mentioned in the water White Paper as well, as David mentioned, because we think it is important that companies do not get into this doom loop of becoming indebted and the service degrading and then never recovering. You are right to say there are some concerning developments in the water sector as a whole. There are some companies, however, that are performing much better than others, and I am sure you will have looked at that as a Committee as well.

If I could just add to that, the enhanced regulator oversight talked about is designed very much to get ahead of and anticipate some of the challenges we have seen over the last few months. In terms of managing direct impacts on service provision, that is designed to help. Also, although clearly the priority is that customers should not suffer disruption to their services, the Government did recently revisit and increase the guaranteed service standards for compensation payments in the event of a range of service disruption. South East Water has made payments worth around £4 million to over 30,000 households and businesses in respect of the recent supply outages in May. It also waived some of the minimum requirements of that. It waived the minimum requirement of around 12 hours continuous disruption before the payment was triggered; it paid out on the basis of the total disruption suffered by all customers. I think it was right that it should do that. It has also made all the payments it should have made in respect of supply disruption in December and January.

I do appreciate that, and the Committee probed quite heavily the compensation arrangement and made some recommendations on that. My point, though, is around the fact that we should be stopping it happening in the first place—the preventable aspect—and here we have South East Water with repeat incidents occurring that are entirely preventable. We need to be looking not at compensation, but at stopping it before it happens. That is really the crux of the issue.

We would agree with that. That is why the new approach that we are bringing forward would have statutory resilience standards, which we have not had before. We are also strengthening the data about asset health, having more forward-looking metrics for assets and asking companies to map them so that we can understand the state of their assets. That is not something that is going to happen overnight, obviously. As you said, I totally understand the perspective of the customers of South East Water. I spoke to some of them when I went to visit and, as you say, the uncertainty about whether it is going to happen again is also something that we bear in mind in our considerations.

I think we have established that we need reform of the water sector; I think there is probably complete agreement on that. Fairly early on, the Committee called for a full value-for-money assessment of different models for water companies. It seems Andy Burnham might be reading our Committee’s work, given some of his recent comments. If you stay in your role, Emma—and I very much hope that you do—will you adopt the Committee’s call for this review to take place?

First, to be very clear to the Committee, I hope that I do stay in my role. DEFRA is an important Department of Government—I think that is obvious to you. As for a review of the different ownership models, there is no legislative block to mutual ownership, which is something the Government could consider. I know there have been calls from some parliamentarians for that. We have a not-for-profit in Wales next door. With regard to the issue of nationalisation, there would be a question as to whether that would be nationalising one or more water companies or all 16 of them. There are discussions around how legally complex and costly that could be. It will be for the future Government to decide what they want to do, so if you do not mind, I would rather not get drawn on that.

That is fine, thank you. Just to complete my tour of various water companies, United Utilities is seeking, as we understand it, to pay its chief executive an annual allowance of £435,000. It has been suggested to us that this is in response to the Government’s clampdown on bonuses. Will the forthcoming Clean Water Bill that you mentioned include measures to rule out this behaviour?

Not the Clean Water Bill, but let me set out what we are doing on that. I am proud of the legislation that was brought forward by my predecessor, Steve Reed—the Water (Special Measures) Act 2025—which we took through Parliament as a Government within a few months of taking office. I expect every water company to keep to both the letter and the spirit of that legislation. For example, poorly performing water executives—four criteria define that—should not receive bonuses. We are working closely with Ofwat, which has asked for full transparency around holding companies and around other ways of remunerating chief executives. That is where we are. We are working with Ofwat to make sure that the spirit and the letter of the law is kept to, and there are various things going on to make sure that happens.

What measures do you have if they do not keep to the spirit of the law?

Ofwat is the regulator. The new regulator, when introduced through our Clean Water Bill, will have sanctions. Perhaps you can talk about that, David.

Ofwat will review how the current criteria for the bonus restrictions have been operating. We currently expect that work to take place next year, so it has the basis of a couple of years of evidence to do that work. If Ofwat was to conclude that attempts are being made to evade the provisions of the legislation—or the provisions of the statutory criteria, I should say, because those criteria can be changed without further recourse to primary legislation—then clearly that is something that it can examine as it undertakes that review. Ofwat has reminded all water companies, including their remuneration committees, of the importance of respecting the spirit of the legislation, and they should be mindful of that as they put in place their remuneration arrangements in the coming period while Ofwat is undertaking that review.

You are obviously right to ask what happens when it looks like companies are trying to get around the rules, but I will just say that, because we have this legislation, £4 million in bonuses was stopped last year.

Can I be clear about this? You have United Utilities; you have Yorkshire Water that got round it by having a payment come from a parent company; you have Thames Water saying that it is paying retention payments, I think. Nobody seriously believes that anybody is paying any attention to the spirit of the law, do they?

Some water companies are, which is why we stopped formally banning.

Those are three fairly egregious examples. Either the present law works, in which case it should be enforced, or it does not, in which case it needs to be tightened up and improved. But you are telling me that you are not going to do that.

As David has set out, you do not have to change the primary legislation to alter the criteria; that is the problem here. Ofwat has put forward proposals to make sure that the water companies are more transparent about their remuneration. So, my analysis would be that we need to tighten up—

With what? Secondary legislation?

We keep that under review, but I think that the rules are clear. The rules are that water bosses who do not perform well should not receive bonuses, and there are criteria that we can—

But still they keep getting them.

As I said, I expect the regulator to hold the water companies to account, and the regulator is acting on this. That is what we are working towards.

It feels like the companies are laughing at Government and Parliament. They are not taking it seriously, are they?

As I said, as the Environment Secretary, given we have this legislation, I expect them to comply with both the spirit and the letter of the law. We have an independent regulator, which will be abolished, and we will have a more integrated regulator of the four regulators with teeth, but this is something that I want the regulator to take very seriously. They are taking measures to see what the regulator should and can do to stop companies getting around this ban.

Does somebody need to be made an example of here? Thames does it and it gets off with it, so Yorkshire does it and they get off with it, and then there is United Utilities. You are quite right to point to the £4 million of bonuses that were not paid, but if you are sitting in one of the other water companies and you want a bonus, you go to your board and say, “Look, everybody else does it”. What is the answer to that?

As I say, I want the regulator to make sure that the legislation is upheld

Okay. We are going to move on to farming in a second. Can I just go back to SAR first? The Water Minister told us last year that the definition of a serious breach of principal statutory duties is that fundamentally water does not come out the tap, your toilets do not flush and sewage does not go away. Can we maybe just pretend that was not said, because I do not see that as being the test? Is that still the view of the Government?

The principal statutory duties are the safe supply of drinking water and treatment of wastewater services. That is a different way of putting it but—

Would you stand by that definition?

Overall, as I said, the statutory duties are safe drinking water and treatment of waste. Those are the two statutory duties.

In making an application for a special administration, the Government, or indeed the regulator, would have to have regard to those duties and would have to assemble evidence around performance against those statutory duties.

The Water Minister also told us, “The current situation is that under the current rules and legislation that we have, Thames Water has not met the threshold for going into special administration”. Is that still the view of the Government?

The Government would have to make a judgment based on the facts at that point in time.

You made a judgment in September last year, according to the Minister. Have you updated it since?

As I say, we prepare for all eventualities, including keeping—

Have you made that judgment since?

At the present time, the Government have not submitted an application for a SAR.

I did not ask you what you had done, I asked you if you had made a judgment. We know that you have not applied to the court.

We make a judgment based on all the available evidence, and if we were to judge that there was a breach of a principal statutory duty or an enforcement order, then there would be an evidence-based case to make for a SAR.

Dieter Helm put it rather well, “If Thames does not merit being put into special administration, then it is a good bet to assume that no major utility ever will”. Do we need to revisit that test? Otherwise, we are just left having to tolerate companies like Thames.

In terms of revisiting the test, the Government have not set out any policy to revisit the test for a SAR. As it stands, we would make a judgment—an evidence-based judgment—based on the facts and the circumstances as they are presented in any given moment.

Just minus Thames Water.

With regard to the performance SAR, the bar is high; it has not been used before. We have received representations that the criteria perhaps should be clearer, and that is something that we will keep under review. I do take the point you are making, but whatever the Government do with regard to any water company, we have to apply to the court. We need a well-evidenced case. We do not want to waste taxpayers’ money by taking a water company—I am not specifying which one—to court and losing in court, because I think then we would be before you and you would be hauling us over the coals for doing that.

Don’t get me wrong; I am not arguing for the Government just to arbitrarily decide who stays in business or not. The rule of law would not tolerate that, I don’t think. Henry, you wanted to come in.

I wanted to ask whether you are content with some of these figures in respect of delay. Thames Water disclosed last February that it is spending £15 million per month on lawyers and advisers. A £3 billion emergency loan comes with an interest rate of 9.75%. And there is £200 million in fees and sweeteners. Even the judge said that was eye-watering. Does that not concern you?

Yes, it concerns me. I do not want us to be in this position in the first place, which is why, in the new legislation we are bringing to Parliament, there will be a performance improvement regime to stop water companies falling into high levels of debt and poor performance in future. No, I would much prefer that that money is spent differently.

Presumably, the bill is going to be picked up by the customers, if the Government are not interested in special administration.

There is no mechanism for the costs of those fees to be passed on to customers.

Can I ask about dry spills? Why are the companies not reporting immediately in respect of dry sewage spills? Why are they doing it monthly? Why have they been asked by the Environment Agency to do it monthly?

We have event duration monitors now in place, with 100% coverage of CSOs. We are moving towards real-time monitoring. I am happy to follow up on your specific question, but I think the intent in the system is to move towards real-time monitoring and data, and for that to be released immediately.

I think the Environment Agency released information saying that it was okay with companies doing it monthly rather than annually.

I am happy to take that one away and look into that, if that is helpful.

We have spent rather longer on that than I had intended, but it is very important work. I want to move on to “The Government’s vision for farming”—you will be aware that that was the title of our first report in May of last year. In recent months we have had the land use framework and the farming road map. Emma, what is your vision for British farming in five, 10, 20 years’ time, if we do all the things that you have outlined in the land use framework and the farming road map?

We can talk about the intermediate steps in a moment, but the overall vision by 2050 is that we move to a more productive, more profitable, more resilient and more sustainable farming sector, and that we have a strategic shift towards a lower input and a more nature-friendly farming system.

Currently, we have 0.6% of GDP coming from agriculture. In five, 10 years’ time, what is that figure going to be?

You asked me this in the Chamber. We have not set—

You did not answer.

I have answered. It may not have been the answer that you wanted, but I did answer that we have not set out a target. As you know, I take exception not with your use of the 0.6% figure but with its use by others who underestimate the importance of farming. Taking agriculture on its own, without thinking about the entire agrifood system—which is a much more significant contributor to GVA and a huge employer of 4.1 million people—the GVA is equivalent to either the construction sector or the aerospace sector. I think that there are some who underestimate the value of agriculture because they do not see the broader supply chain.

Nobody in this Committee, I am sure.

I am sure. I am preaching to the converted here. We are taking that up with the—

Have you not got a target?

We have not set a target. We would like to boost, and we can get into this, but as you will have seen, one of the first things we did in response to the Minette Batters independent farming profitability review is to set up the farming and food partnership board and take forward sector growth plans, which again is another recommendation from Minette. We are starting with horticulture and poultry, because we think there are some great growth opportunities in those sectors. Those are the ones we are starting with; there will be more to come.

To take poultry, what are the barriers to growth?

What are the barriers to growth? There are lots of different barriers to growth, but a big one is planning. We discussed the issue of poultry at the second farming and food partnership board but—

Just on planning, you have an outstanding commitment to the NFU, I understand, to convene a roundtable with Steve Reed and yourself. When is that going to happen?

That remains to be seen. It is not in the diary for the moment, but we are working closely with MHCLG. By the way, I did discuss this with Steve back in December, before he launched the consultation on the NPPF, which has those permitted development rights in there, which would affect the industry’s ability, essentially, to expand in poultry. We think there is great investment out there waiting to be made either in England or other places, but maybe Emily wants to say a bit more about that.

We have had some helpful input from the NFU and others on what the planning barriers are—they are quite broad. Some of them get solved by the national planning policy framework that we have referred to. Some of them are about how we implement the environmental guidance with Natural England and the Environment Agency.

Still, everywhere I go in the country, farmers tell me, especially in poultry, that they cannot get planning permission. Quite apart from the need to replace deteriorating assets, they are under pressure from yourselves to reduce stocking density from 38 kg per square metre to 30 kg per square metre. The current estimate is that we need something in the region of 1,000 new poultry sheds. We think there is more than £1 billion of capital investment tied up in the planning system. As a growth department, why is that still being allowed to happen? Why is it still so difficult to get two Secretaries of State in a room with some farmers to sort it?

We are looking to sort it, and you are right to be impatient for change. I would like to see change happen more quickly. As Emily says, the planning barriers—

Is it Steve’s fault?

No, I am not blaming Steve.

I think there will be a roundtable. The things that we need to resolve are broader than a meeting.

Yes, I agree with that.

We need to resolve some issues about guidance and how those things get interpreted. Some of the things that MHCLG has already done will help, like committing additional money for planning officers, which has not yet gone through the system, but there are quite a lot of detailed points that we need to resolve. We have had it in the farming and food partnership board. There is a discussion already on poultry. We are coming back to it at our next meeting and have been very constructive.

I am not hearing anything that I have not heard for the last two years at least. It just suggests to me that there is no real sense of urgency in the Department. Tell me if I am being unfair to you.

You are being unfair.

How?

I want to bring down these barriers as much as you do, but we are not in charge of all the levers. I am not trying to blame anybody else. We know that there is significant investment out there waiting to be made, if only the circumstances were better.

Let us take another sector then: beef and lamb. The Climate Change Committee tells us that it wants to see a reduction of cattle and sheep numbers of 27% by 2040 and 38% by 2050. Is that a target that the Government are going to adopt?

No.

What figures would you anticipate?

I am not centrally planning the agriculture economy from Whitehall, so I do not—

No, but is anybody in Government going to meet Climate Change Committee targets then?

There are other aspects of the Climate Change Committee report that we are looking at. We are also looking at different solutions to the problem that you are outlining. With regard to cows, obviously the big problem is methane, and there are other things you can do rather than reduce the numbers.

There are ways of accounting for it. Emily, do you have some suggestions?

Yes, there are also things like genetics and feed and so on for reducing emissions. In the road map we have committed to doing what we can to support resilience through the schemes and so on, so we are doing a number of things.

I was going to say, “Pretend I am a farmer”, but I have a farm—you know that; it is all previously declared. Pretend that I am somebody who relies on farming for my living. I am looking for this vision of what the Government want me to do for the next five, 10, 20 years. I am a beef and lamb producer; what should I want to do? What are you going to encourage me to do?

I think we have set out in the farming road map the transitions we are looking for: a technology transition, reducing—

Do you want me to buy more cows or not?

I think you have to judge as a farmer whether that is what the market is looking for.

So the Government have a farming road map but no view in relation to livestock numbers. If we had a defence map that said, “We have no view on how big the Army or Navy should be”, would that be credible?

That is slightly different given that we do, as a Government, own the Army and the Navy and the other armed forces. We do not own every farm in the country.

If you are going to have a strategy, surely these are the things—

We have a land use framework, which talks about changing some use of some of the land. In the farming road map, we set out how we want to work in partnership with farmers so that they can move to a lower input and therefore lower cost, more nature-friendly farming system. We have said that food production is the primary purpose of farming, but it has to go hand in hand with healthier soils and more sustainable farming practices. With respect, I do think it is quite different to the defence analogy that you used.

If you are pushing people towards nature-friendly farming—great idea—surely there would be the opportunities for livestock numbers to increase in that? You move back to a mixed farming model.

As I have said, we do not have a target or a have a view as to whether livestock numbers—we talked about this last time—should increase or decrease. With regard to the Climate Change Committee recommendations, there are different ways of doing that. It is also worth saying that, due to genetics and other improvements, we are getting more meat from animals, so actually you can get more meat from fewer animals. That is not to say that there should be fewer animals, but that the production levels have changed.

I am not hearing any hard figures or targets.

The only thing I would add is that we have agreed with the NFU and the farming and food partnership board to start with poultry and horticulture for the sector plans, so we will run those hard. I think we need to review, once those are done, to see where we go next.

We want farming that is going to be more productive and profitable, but I am not seeing anything other than a vague aspiration there.

There are nearly 300 actions in the farming road map, as you will have seen, so I would not say that it is light on detail. There are more detailed plans to go up to 2030 than there are beyond 2030. We do indicate some directions of travel beyond 2030, but the more immediate period is where we have set out more details. It is a 25-year road map, but it targets metrics only for the first five years. The most detailed actions in the road map are for the first five years, and then we set out direction of travel. This is the first time that the Government have ever done this in England, and it has been broadly welcomed. There may have been some criticism, which is fine—we are happy to take that.

James Rebanks on Twitter said, “It is a vacuous pile of waffle, completely empty of the commitment or the investment to get food security and climate change resilience or deliver actual scaled up nature recovery”. I will not read his final line or I would have to pull myself up.

I do not have them with me, but I could read you a number of quotes where it has been welcomed. We are never going to please everybody. If we did that, we would never do anything, would we?

I think the problem in the farming road map is that you are talking about giving certainty, but if I am a beef farmer now, how do I have any certainty that I should have invested in stock? The point is that they are trying to plan, but they do not know where the Government are going or whether you will suddenly say that they have to reduce density. What is frustrating is that you ultimately steer the market. You said that it is different with defence because the Government control it. What the Government say indicates where the market will need to go, so please offer certainty—that is the plea—so they know whether to invest. Otherwise it is a difficult market for them.

I understand it is a difficult market, and there are many factors beyond the Government’s control—the global price of beef, for example. I cannot sit here and tell a beef farmer what to do in precise numbers in the next five years because it will also depend on what happens in the global market.

You will appreciate that they need to know that you are not going to suddenly completely turn the table over.

As I have said, we are not looking to reduce livestock numbers. That is not something that we have agreed in the recommendations of some of the other bodies. We are certainly not looking to do that.

I think we will move on because we have got more still on farming. Sarah, you will lead us into the future of ELMs

Good afternoon. Agriculture is evolving and transitioning from the EU-style subsidies to the “public money for public goods” approach under the ELM schemes, consisting of the SFI and countryside stewardship high tier scheme and landscape recovery scheme. The farming road map says that the ELMS funding distribution will evolve over time, with SFI being the largest scheme until 2030 and the other schemes accounting for a greater proportion thereafter. What do you see the scale of the shift being after 2030?

That is a good question; thank you. What we are trying to indicate post-2030 is a direction of travel, but obviously I cannot set out precise numbers for a future Government. What we are anticipating and hoping is that more farmers will come into the longer-term schemes. For example, on higher tier, I just announced last week that instead of it being invitation only, we will open up the scheme soon in the coming weeks to expressions of interest. We are hoping to get more farmers into the higher tier. The landscape recovery, as you know, is a 20-year project, so it is twice as long as higher tier.

Just on that, the countryside stewardship higher tier scheme has only been available to land in certain areas, including SSSIs and common land. The landscape recovery has had two pilot rounds, and has not been open since 2023, so that is limiting. We know that the SFI closed unexpectedly last year. It has been reopened in the last couple of days; 25% of the budget was allocated by 1 July, and 50% by 3 July, so obviously there is a huge appetite for SFI. I will come on to another specific question about that. We need to make sure that schemes are robust, that the funding is there and that schemes are available for farmers to bid into. I am very pleased that the SFI is available for smaller farms and those that have not previously bid into funding before, because they are the ones that generally are not prepared, so it would be interesting to see the stats on that going forward. It is about how we change the design or how the Government are going to change the design of these schemes, first, to make sure all farmers can access them properly, but also to scale them up so that farmers outside of those specific areas—whether SSSIs, common land or the old AONBs—are able to access that funding. What are you doing to scale it up to make sure it is accessible?

I will start and then hand over to Emily. Thanks for your question and for welcoming the fact that window 1 is for small farms and those without an agreement. The first thing to say, because you mentioned this in your question, is that I promised earlier in the year there would be no sudden unexpected closures. We had that experience last year, and we know how bad that was in breaking down trust between Government and farmers. We are using these milestones—25%, 50% and 75%—to give much more notice to farmers as to when we are near the end of the budget for that window.

On SFI, the first window, which is for small farms and those without an agreement, is £60 million of budget. As you saw, we announced last week that we had hit the 25% and 50% marks for that money having been applied for. We will do an update at 75% as well. There is a further £180 million available for the second window, which is available then for anyone who is in an existing agreement, and anyone who did not come in through the first window—even a small farm—can apply again in the second window. That will be open in September. What we are trying to do is gear this first window so that small farms and those who are not already doing the environmental land management practices that we pay for can have that money available, and we hope that will have incentivised things. In terms of countryside stewardship higher tier, this year there was at least £50 million available, but we are also putting over £200 million into the capital environmental land management scheme, which should open at the end of July, so there are schemes available. Then there are thousands of farmers in existing schemes who are receiving money through the environmental land management budget—so it is not just about new schemes; it is also what is already there.

Going back to SFIs, given that, as of 3 July, we have already allocated 50% of the budget, it is likely that we are going to hit that 75% very shortly, as many applications are coming in from farms that are eligible now. If extra budget is required to enable those smaller farms or those that are not in schemes to come forward and access funding, will it be made available for them to be able to apply pre-September, when the wider scheme opens?

This window only has that £60 million. We are closely monitoring what is happening day by day with the Rural Payments Agency. If and when we get to the 100% and there are still small farms that have not applied, it is still open to them to apply in window 2, but we will not be opening extra budget before window 2.

Given what we have seen at the beginning of July, we are at 50% but those applications are coming in thick and fast. Some farmers are not going to be able to apply over the summer but fit into the eligibility criteria. Is there no flexibility to ensure that they can receive funding? They are the priority farmers, are they not, so if they are missing out, and are pitted against all the other farmers that come, surely that puts someone on a unfair footing?

I understand what you are saying, but I think it is difficult for the Government. I do not think we can have window 1, window 2 and then a bit in the middle. We have been very clear that there are two windows; £60 million for window 1 and the remainder for window 2. I think because it was such a highly anticipated scheme and people have been waiting for it for such a long time, it is quite normal that there was such a big number in the first two or three days. I am not sure you are right; we will have to see. Perhaps we will not reach the 75% milestone quite as quickly.

We will see what happens this week, but we did give notice that the scheme would open in June. We then said it would open on 30 June. We made the guidance for the scheme available some weeks ago, so we hope that people, including the small farms, will have had plenty of time to prepare an application. We did see strong demand on the first day and second day. Actually, the demand is not quite as strong today as it was last week.

I think it is always the case that those who can will, and they have the right advisers who are able to help support them in their applications. The difficult farmers to reach are the ones who are going out and doing the day job and do not have the extra support to be able to reach into these schemes. Those are often the groups that really need that support, and they will come in later because they have not got people there to react quickly. I feel strongly that we need to be able to support those businesses to access this, or they could once again fall by the wayside if the funding is not there. Once the second round opens, it will be exactly the same: those who can will.

The scheme is the same design now as it will be for window 2, so the guidance is available, people can prepare their application, and they can understand how the system works. We were in private beta, as it is called, before the scheme fully opened, so we were testing the system to make sure it could be accessed without special advice. You can self-serve on it. We designed it to try to make it as simple as possible. We have taken 30 to 40 actions out of the previous arrangement so that it can be accessed more simply. I hope that we have done what we can to enable people, including small farmers, to access it. In fact, the average agreement application last week was higher than this week, so I think smaller farms are applying this week more than last week.

Can we keep a watching brief on that? I would be very interested to see that pattern of applications as they come through and how quickly that drops away. Going on to the SFI being made leaner, simpler and fairer, obviously it has fewer actions than SFI 25. What else are you doing to make sure that it becomes simpler and fairer going forward?

It was a recommendation from Minette Batters. We are working with the RPA on this. The previous Farming Minister, Angela Eagle, actually put herself in the position of a farmer doing the application to see how complicated it was. We have done some work with the RPA in simplifying it. By the way, we totally agree with your analysis and your intent. We want to see more farms and smaller farms benefit from the scheme, which is why we have opened window 1 earlier than window 2 for those farms. We are working to do all we can to simplify.

There will be further things that come as we improve the IT system in the next 12 to 24 months, but this is a simpler version of the scheme that we have done this year. The other thing I would add is that the announcements that the Secretary of State made last week on countryside stewardship should also make that scheme simpler to apply for as well. It is a more complicated scheme—the things you are doing under it are more demanding—but being able to express an interest in applying, rather than waiting for Natural England or someone to tell you that you are eligible, for example, should open up more access for that scheme as well, and there is money available in that scheme.

Will the IT systems ensure that payments are made out in a timely fashion?

Yes. In fact, the RPA’s performance on that has been really good for the last few years.

Just coming on to spatial approach, the farming road map says that there is going to be a move towards a more spatial approach to ensure that actions are taken where they will have the greatest impact. What farms do you expect will gain or lose funding under the targeted approach, and how will you create certainty around funding for all those farmers?

That is to be worked through. The commitment to spatial targeting was made in the land use framework and then repeated in the farming road map. The hope is that there will be some spatial targeting next year. Everyone knows that nature is local. The particular needs in terms of recovering nature in certain landscapes are different to other landscapes, so we will be bearing that in mind as we apply the spatial targeting. We have some detail to work through on how we do that.

We are going to move on to questions on green finance.

Thank you for coming before us, Secretary of State. The road map sets out a vision for a growing role for private finance, nature markets and supply chain standards in farm support, while public funding would become more targeted. That is potentially a big gamble. If the market does not respond accordingly, that plan might have to be curtailed or even aborted completely. What evidence do the Government have that these mechanisms will be developed enough to replace those elements of ELMS in just a few years’ time?

Thanks for the question; I think it is really important. There are a few things to say about this. The first is that there are some promising developments, but it is a nascent market. We do have big companies that are investing in their supply chain. For example, Diageo is investing to restore peatland in Scotland for whisky production. Nestlé is also investing in its supply chain to make it more resilient and to protect against risk to nature. That is good to see, but you are right, we would like it to be even more widespread in other big companies looking at their supply chain and their risk to nature and the knock-on implications for farming. We also have a compliance market through BNG. When I did my first international visit in this role, one of our European counterparts came to see me and said she was interested to learn more about what we are doing here because it is not happening to the same extent in other parts of Europe and the world. Although it is nascent, I think there are some promising things happening. There has to be a demand and a supply for these things, but we have to protect against screen-washing by having the right standards. We have been working closely with the BSI to ensure that there is a voluntary suite of nature investment standards, so that people know what they are buying. We will keep this under review. There is not going to be a line in the sand where we say, “We are not going to do this any more; we are just going to do this”. It is more subtle than that. We are also setting up a task force under the farming and food partnership board on private finance.

You have said most of what I was going to say. On the side of the farmers, obviously farmers need to be supported to be able to offer those nature products to the private sector. That is a new way of thinking for many. The natural environment investment readiness fund did fund some farmers last year and the year before to get ready. That has flowed into, for example, some of the work on landscape recovery. We hope that things like the collaboration fund that we are doing with farmers will be another place where we can encourage farmers to come together to be in that more demanding relationship with private finance.

The road map does also talk about, as you have said, scaling up nature markets, including BNG, which you have mentioned, but we know that recent Government policy changes are attempting to coax developers to build more homes by cutting nature restoration obligations, and that will inevitably dampen demand for BNG credits. Natural England told this Committee that confidence in this emerging market has been “shaken” by the changes. In that context, how is DEFRA going to support the scale-up of that market and other markets?

From the autumn, we announced earlier this year that BNG will apply to nationally significant infrastructure projects. You are right to say that there have been other changes as well, but that change to NSIPs will expand the role of BNG.

What is the contingency plan if the markets are not in place? Will you, as you said, keep it under review? If we get to 2030 and it is not where we want it to be, will public supportbe pulled away as quickly?

I think we have to see how it develops.

As we have discussed previously, many farmers found previous iterations of the SFI to be incredibly complicated. I recently sat down with a livestock farmer in my home village. She said she has been struggling with the tapering of basic payments. I asked her about the SFI. She said she had never applied for any measures. I told her that it has been simplified quite a lot in this iteration and encouraged her to apply. She said that she would take a look. Now, potentially, she could face having to access highly complex nature markets on top of that. Do you expect that most farms will earn income from nature markets, or will it only be suitable for some farms, perhaps larger ones, that have that capacity to be able to do that work?

We are seeing quite a lot of diversification income among farms since the basic payment scheme finished; we can see that in the farm income statistics. Environmental land management schemes are one source of income that some people will receive and have been applying for. Private finance is another, but it is still quite nascent; there is a lot of work to do. The Department is doing the things that it is doing to try to encourage supply and demand, which the Secretary of State set out. I think there is still quite a lot to develop there. The BSI work on standards is critical to make sure that they are trusted. The work to support farmers to be ready to receive that money is another crucial bit of the work, and we hope that the collaboration fund will help in some of that peer-to-peer learning and farmers coming together. There is work to come

How will the work that has been done under the readiness fund—you mentioned the collaboration fund—reach a scale across the country to enable the changing focusing of public money elsewhere? That is a massive culture shift that will happen. It has taken us many years to get to a point with the SFI where it is simpler and more accessible, and we are talking about another major shift in this direction in potentially three or four years’ time.

SFI first opened in 2022. We are now, in 2026, at a simpler version. We have been through several iterations and have learned a lot. We can learn and improve quite quickly in this space as well and I hope that the money, like the money in the collaboration fund, can be part of that.

Going back to the Chair’s question, pretend that I am a farmer sitting in front of you and I am telling you that I barely have the time for a life beyond what I need to do on farm. I am struggling to access SFI countryside stewardship. I feel like they come and go before I even have a chance to think about it. How will those farmers be able to handle this world of accessing nature markets and understanding what the market wants from them, on top of what they have to do for public money?

Obviously, they need support and those are some of the measures that we have set out. There are 48,000 farms in environmental land management schemes, so many are in it and are doing it. I hope that we can get to a similar position in nature markets.

You have just come back from New Zealand. I read some of the things, and it would be really interesting to hear more about it. Something that we mentioned in the road map, and that we are very serious about as a Government, is looking at what more we can do in Government to bring down any of the barriers to further strengthening co-operatives in agriculture, because we know that helps to redress the power imbalances that we see. We know that in other parts of the world there are bigger numbers of farmers in these co-operatives.

Yes, we will have a question on that more specifically later, but that peer-to-peer learning is powerful. We have seen that it engenders a lot more trust and mutual understanding than anything that would come out from Government, just by the nature of farming and needing to understand where people are coming from. On a more technical note, if you envisage that a typical farm might be combining public money with private finance for removing carbon, improving water quality, managing flood risk and enhancing biodiversity, they will have to stack and/or bundle several measures together on different parts of their land. The complex issue of not being able to double up on funding for the same action is a major barrier to farmers accessing nature markets right now, as you have noted. How will DEFRA ensure that public money and private investment are not paying twice for the same environmental outcome?

That is a concern we hear a lot from the NFU and others.

I was talking to our lead on this earlier today, and he said that it is one of the things internationally that people are grappling with, trying to work out how to make sure that we complement the public goods that we pay for and the public goods that markets pay for. There has been a lot of thinking; there have been a couple of consultations and we are in the policy-design process. Our intention is to open up ways for farmers to combine private income from nature markets with public funding. The Corry review recommended that. That is where we are trying to get to.

How do you see that working in terms of checking compliance? We know that DEFRA’s arm’s length bodies are under a lot of strain. Natural England has just shed 250 staff through voluntary redundancy. How will you make sure that the book is not thrown at people who are doing their best, not trying to game the system, while a small minority who potentially are trying to get multiple sources of funding for the same actions?

We will largely be doing it in the policy-design process rather than the compliance process. For example, if we discover that nature markets are starting to fund things that we currently fund through SFI, we will need to think about the policy design of SFI in the future rather than looking retrospectively.

How would that work if, for example, markets are moving into an area that the SFI is funding but not at the quantum that would enable farmers across the country to access that funding? You would not want to pull that funding out of the SFI if there was not the scale to replace that. You will have to look at it on a capacity basis as well, won’t you?

Again, this is to be worked through, but the principle would be that if the nature market is not providing them, the SFI has to consider making the offer.

Does that not potentially introduce a huge amount of complexity to the scheme? We have just been through a process where the number of measures under SFI have been reduced quite a bit, which is welcome, I think, for a lot of farmers. Does that not add in another layer of complexity, where you are saying to farmers, “This is available on the private market, so we are not going to fund it any more”? Year to year, that could change. How will they keep up with that?

That is some years away. At the moment we have made a commitment to the schemes being as stable as possible. The one thing that we have signalled that we will be changing next year is the issue of spatial targeting, which we have already talked about. The nature markets piece is to be developed in the work that we are doing right now, which is the stuff on standards and on supporting farmers to access a relatively nascent market. To build that is where we are now.

We know that the potential demand for credits in this space will vary a lot across the country. Obviously, we have very different landscapes across England, with very different types of farming. How will you make sure that farmers are not excluded from future funding models because they farm outside of areas that are being targeted either by DEFRA mapping or by nature markets for where these credits need to be spent?

Again, we need to get to that in the policy design.

Will that targeting of public money that you mentioned be aimed at farmers who are struggling most to get access to those markets, and those who have more options get less?

It is a consideration.

Emily, you mentioned earlier the iterative process of learning through the finances as we are going through SFI and that you are learning stuff now. Can you give us an indication of the patterns that you are learning from the applications? I appreciate that they have not been open for long, but you would have previously had some thoughts anyway about how it could be further improved in the next financial round, next year. What are the things that you are seeing, what are you looking at and how do you expect to improve it in the future?

As some examples of things that have changed for this version of SFI, we have taken out certain actions that did not have very significant take-up. There were certain actions where we had a lot of demand, like the top three actions with a significant amount of spend, and we felt that we were probably overpaying for those outcomes, so we have slightly reduced the payment rates. There have been a couple of changes that we have made to incentivise particular nature outcomes in the uplands and moorlands. Where we were seeing perhaps not enough uptake or too much uptake, we have tried to adjust things. We also took away the management payment, because we felt that that was not necessary any more. Those are changes that we have made already. What we are looking closely at now is what the average agreement size of applications is so that we are making sure we are meeting our objectives around small farms as well as larger farms. We have targets around nature recovery that we are keen to get to on biodiversity and water quality. We are keen to know whether those actions are getting the uptake that we hope for and expect. We are expecting the scheme to be pretty stable now. We have learned a lot, and this is the direction of travel. Ministers have been quite clear about that. I would say that, in the next iteration next year, we will be looking at spatial targeting in particular. We will see if there is anything from this year that particularly bothers us, but I feel like we have done quite a rigorous policy process in the last 12 months.

I will just leave you with a comment. You can appreciate, Secretary of State, that farmers get very nervous with change, but they recognise that the scheme is not fit for purpose as it has been in the past, and they would welcome improvements to it. The message needs to be around this not being a radical overhaul—it will be an existing SFI platform—but to make the improvements based on their feedback. That would go down well.

That is the direction of travel. We do not want to make any big changes to the schemes because, as Josh and Sarah said, you want to be able to make sure that these are accessible to smaller farmers and people who do not have the money to pay consultants. Yes, we are looking at what we can do to improve the accessibility and to continue to simplify.

Can I take another quick look here at this business of the nature markets? On the one hand you are saying, Emily, that this will take time, but you have set yourselves a 2030 target to start replacing ELMS with nature market funding. Is that correct?

We are expecting that, by 2030, there will be more private funding into farming.

Where does that 2030 target come from?

It is just where we are expecting to get to.

You are talking about creating a new market in three and a half years. It has taken you two years to write a farming road map. Does the Department have the capacity to do this?

It will not just be the Department, obviously. We are not suggesting that we would stop doing ELMS or SFI by 2030. It is about setting a direction of travel, about trying to increase the share of the market in these things. You are right that these things are not easy and they are not often quick. However, we expect over time that there will be gradual increases in nature markets and the income that can be available to farmers. That will not entirely replace public money for public goods. We are not saying that.

Aren’t we at risk of repeating the mistakes of the last 10 years in the next 10 years? You had a difficult transition to environmental land management schemes. That undermined confidence in the industry. You are now looking at making a further transition away from ELMS towards green markets and green finance markets. Can you give us a baseline for how much money is going in today, let alone what will be going in five years’ time?

Over the Parliament, for the farming budget, we have £11.8 billion. It obviously will depend on future spending.

For green finance markets?

No. Sorry, I misunderstood your question.

Spoiler alert: I do not think anybody knows that.

No.

We do not know how much is going in at the moment. It will be difficult, then, to measure increases going forward. I love the ambition, but if you are a farmer sitting in your farm kitchen thinking, “What will this mean for me?”, I do not see a compelling answer.

At the moment, the environmental land management schemes are what we are offering, and we are trying to improve the arrangements for private finance, which would supplement the existing arrangements. They are not there to replace them at present. That is the current set-up. We want to build, as we have set out, a number of things to make the private nature markets stronger. There is already the work with biodiversity net gain. We want to get more into food and farming. We can come back with more detail at another session if needed.

We will move on, then, to profitability and supply chain fairness.

Good afternoon, Secretary of State. One of the things that we always do is speak in generalities. For my questions we will focus on one sector within agriculture, which is horticulture itself, because it is one of the most productive parts of agriculture in the UK. Some 2% of farmland generates almost 20% of farmgate value, yet it is one of the most energy-intensive sectors. When we are talking about profitability, we also need to consider the input costs as well as outputs. In a general sense, how are you working across Government, particularly with the Department for Energy Security and Net Zero and the Treasury, to ensure that horticultural businesses are not excluded from energy support schemes simply because they fall outside existing classifications?

We are working across Government on this. It is not easy and you are right to say that horticulture is energy intensive and therefore the input costs are high. We are looking at what we can do with the farming and food partnership board, looking across the supply chain, because we know that in recent years there has been a drop in the proportion of the fruit and veg that we consume that is grown here in England, and we would like to see that increase. We think that there is great potential for that.

The point on energy costs is complicated and a little bit frustrating. The SIC code excludes particularly controlled environment horticulture from some schemes that they might otherwise qualify for. We have been having a number of quite deep conversations with the Department for Business and Trade and DESNZ about the schemes. We are trying to look at all options for how we can assist, because we recognise, as we do in this horticulture sector plan work, that the energy cost is a significant cost for the sector.

That is an important point that you just talked about, Emily, with the SIC codes, because we have got ourselves into the slightly ridiculous situation of having an SIC code for cut flowers within horticulture but not for anything else. Why have we got to the situation where only cut flowers have been considered?

It is set by the Office for National Statistics, and I understand that it comes from an international set. I have had a go at trying to amend it and have not succeeded yet.

Is that a problem with other Departments not wishing to work with DEFRA?

No, it is not at all to do with people not wanting to work with us. It is to do with things that people have control over and things that they do not have control over, and the SIC codes come from an international set-up.

Is there anything stopping us from ignoring the international codes and putting in place our own?

You will have to ask the Office for National Statistics about that.

My next focus is on the supply chain and the fairness aspect of it. Quite a few of us in this room are in agreement that it is not a fair system. Farmers are, at the end of the day, price-takers, not price-makers. Within horticulture, again, I speak to growers and they tell me that they can absorb the risk from weather, pests and global markets. However, it is pretty much impossible for them to absorb all the costs associated with the commercial risk in the supply chain, last minute specification changes, delayed negotiations and limited opportunities to revisit price leave. Many profitable businesses are becoming unprofitable, despite producing exactly what the market needs. Would you, Secretary of State, consider introducing a horticulture buyers’ code of practice, building on the principles of the groceries supply code of practice so that the risk is shared more fairly across the supply chain?

We definitely want to see fairer supply chains. I will come to your question, but first it is worth putting on the record, Chair—I think the Committee knows this—that we brought the Groceries Code Adjudicator from DBT into DEFRA last week, which we think is a very good thing to do, and we are looking at what more we can do. We have a sector-by-sector approach when it comes to the fair dealing regulations, which are with regard to the Agricultural Supply Chain Adjudicator.

Horticulture has particular features. There are 300 different plants, vegetables and fruit that feature, which would make it different from dairy or beef or lamb, and therefore a bit more complicated in terms of the supply chain questions that you are raising. We have been very fortunate to have some very constructive discussions with a number of horticulture groups on this horticulture sector plan: the Horticulture Expert Growers Group, which does the large-scale edible horticulture in the way you describe, the Environmental Horticulture Group and the Agroecological Group, which is more focused on things like organics and so on. They are raising a number of different issues, including some of those things you are describing, but also things about water resilience, R&D and how to unlock capital investment. The planning issues that we have heard about in poultry also are featuring for some glasshouses, as well as some labour issues and the question of demand from the supply chain. One of the things that we were able to do at the last farming and food partnership board was look across the supply chain and say to the retailers, “Could you help in terms of thinking about your forward demand, because that should assist some of the domestic growers?” There is a lot to go at. We do not have horticulture on the fair dealing obligations plan at the moment in the way you are describing, but I can take that away and look at it.

Following on from that point, do you see within the Department that there is 100% parity of esteem between the three aspects of horticulture, or do you see one or two having more of an impact within the sector than the others?

We will be quite even-handed.

Do you not think that giving the two largest sectors—environmental and edibles—parity of esteem with agroecological risks undermining profitability within the sector?

We are doing this in partnership with industry, so they are the ones who are making suggestions about what we can do. The themes that are coming up from those different parts are in common—questions of planning, energy costs and so on. We can solve some of those and help a number of parts of this sector.

Thank you very much. The next aspect that I would like to look at is domestic production and resilience. The United Kingdom, as you said, Secretary of State, still imports about half the vegetables we consume, about 85% of our fruit and a significant proportion of the young plants that underpin both food production and environmental horticulture. At the same time, businesses have been telling me that high energy costs, planning delays and regulatory burdens are making investment here less attractive than overseas. What is your long-term vision for increasing profitable domestic horticultural production, and how can we ensure that these decisions taken across Government are actively encouraged so that businesses do invest within the UK rather than moving production abroad?

You are right to say that we are in a competitive environment. You ask what my vision is. I would like to bring down the barriers that are attracting investment elsewhere because it is cheaper to make that investment in other places. That is what we would like to do. You are right that we need a cross-Government effort on that.

In your view, what is the greatest barrier in terms of horticultural growth?

Horticulture, as you rightly set out, is complex. With poultry it is more on the planning side, but with horticulture it is planning, energy, costs and a variety of issues.

As with poultry, there is significant international competition. Our domestic providers are competing with the Netherlands, Morocco and Spain. One of the advantages that we have here is our precision-breeding regime, where we are able to support innovative technology, so that will help. There is more that we can do in assisting with the adoption of new technology and extending the growing season, and with some of the capital investment. How to encourage that capital investment into a very low-margin industry is a thing that we need to address through the horticulture sector plan.

My final question is about the aspect of inputs towards it. There is a high reliance on foreign labour within the sector. With the visa scheme that is in place, pretty much all the visas will be allocated. They are also allocated at an unusual time of the year for the sector. Going forward, to ensure that profitability is more guaranteed, what action will the Department be taking with the Home Office to give the certainty that the sector needs?

We have a commitment on the seasonal agricultural workers scheme over a number of years, which I cannot track down right now, but there is a very active and collaborative conversation with the Home Office about that. The other thing I would add is that precision breeding can help with automation. I visited a controlled environment horticulture glasshouse a few weeks ago, where they are hoping that they can grow tomato plants in a different shape so that robotics can be used to collect the tomatoes. Innovation that saves money, increases yield and reduces costs is a great thing that we can do, potentially, in the UK.

Do we need to be careful that we do not think of all horticulture as controlled environment? It will be nigh-on impossible to get purple sprouting broccoli, for example, to be picked anything other than by the human eye and hand. As much as we might want to go for investment in technology, the human aspect of it will still be vital.

Yes, and the seasonal agricultural workers scheme has a good record now of making sure that that labourers are well treated, that they comply with the immigration rules, and that all the things that the Home Office gets concerned about are attended to. We can demonstrate that well to the Home Office.

Gosh, that is a very big question! It is interesting to hear that reflection on your visit. There is a trade-off here. It is difficult for the Government because our broader focus at the moment is keeping down the cost of living because we know that that is a big issue for all our constituents. If we were in a different economic environment, perhaps that would not be quite as important. However, it would be difficult to say to the British people that we want them to pay significantly more—or even marginally more. We do have a supermarket sector in particular that is fiercely competitive, which keeps the cost down. I think the supply chain fairness is where we want to act rather than saying that we want to increase prices in the shops.

It is very tricky just to take one product, because obviously you would be talking about an increase in a basket of products, wouldn’t you? You would not just have an increase on a pint of milk or whatever it might be. These questions are very difficult, but we want to address some of the power imbalances through more use of co-operatives or farmer collaboration, to make sure that farmers are more powerful in that market. We recognise that we have some leading supermarkets that are very powerful. How do you address that imbalance? That is with the road map and with our policies, where we want to be focusing.

I am aware that this is a very difficult time for the pig industry. We have had a change of Minister recently, so forgive me, but I do not know whether Stephen has met with the industry in the last two weeks. I would think that Angela did.

Our sector teams engage week by week with the pig industry, which you probably dealt with when you were doing the fair dealing obligations. Yes, there is a very active conversation. We are aware that there have been some termination notices served. We are keeping quite a close ear to the ground, including with the Agricultural Supply Chain Adjudicator, to see if there have been any contacts and if people are concerned about the way that those contracts have been terminated. We think that it is all happening in keeping with the fair dealing obligations, but if anyone does have a concern, they can raise it with the Agricultural Supply Chain Adjudicator.

Let me take CO2 first. We have subsidised, you will have seen, for NSOs to be back in operation because we were concerned about reducing supplies of CO2. On fertiliser, we are worried about the big price increases that we saw earlier in the year and what that means for farmers, particularly for the next planting season. We have asked AHDB to increase the transparency of pricing; it has gone from monthly to weekly pricing. We are considering—we have consulted on this—temporarily suspending tariffs on fertiliser. We also have a relatively new online nutrient planning tool, which helps farmers to use less fertiliser.

That is a question for Treasury. I am happy to take that away. That is not a decision that I can make, unfortunately.

We are discussing these issues with the NFU. We know that it is a big, big concern for the industry.

Secretary of State, aligned to that point, one of the biggest challenges that we have seen over the last year when the market sees shocks and the Government are not able to step in is that agriculture and food production, although significant, are not part of the industrial strategy. If they had been part of the industrial strategy, which I appreciate is not in your Department’s remit, the Government and the Treasury would have been able to step in on a number of issues. I will not ask you to comment on that specifically, but do you think that there is an opportunity for Government more broadly to look at a national resilience strategy? Food production would naturally be part of that, like defence and so on. It would then give the Government powers to step in on action for domestic production of ammonia—not least, given everything that you have talked about, the energy costs around production of ammonia. If we had that national resilience strategy, we would be able to make sure that we were shoring up our infrastructure and domestic production, rather than relying on imports, and we would be able to step in on the cost of energy production within agriculture more generally.

Yes, there are many different meetings across Government on the middle east response, which goes to some of the things you are talking about. If the Government did a broader resilience piece, that would sit in the Cabinet Office. The Cabinet Office plans for shocks that could happen to different systems in the future. I can see the argument that you are making about food resilience, and it is something that we do discuss in Government, but I cannot say more than that.

Food is one of the 13 critical national infrastructures, so we take it very seriously. Food security is a big deal. We track a number of different aspects of the food system from inside DEFRA to see if there are any risks. We look at things like inputs, fertiliser, energy costs, labour, cybersecurity, haulage, fuel access and so on; the infrastructure that sits behind the food system; and the commodities themselves. Are we producing enough domestic capacity for food and are we able to import enough? We keep a close eye on that. We have very good relationships with industry to deal with any acute shocks. We also exercise for more catastrophic shocks. We have taken some of the lessons from those exercises in recent times. We have just had the National Audit Office in, reviewing our food security work. We expect it to report in the next few weeks. I imagine that I will be doing a Public Accounts Committee on that soon. That is making some recommendations on where we can improve our readiness, which we hope will improve matters.

We will not have to go for a Division, I am delighted to say, so we should be able to get through the material. We have two fairly substantial pieces of work to do between now and 4.30 pm, and a few others that we would like to mop up if we can. Sarah, you will lead the questioning on border biosecurity in the SPS deal.

Apologies for my voice; it is nothing to do with England or with shouting. Do you have any updates on the SPS negotiations that you can share with us?

We have Emma here, who is the expert. Let me just say, by way of opening, that the negotiations are going well. We obviously cannot provide you with a running commentary on the details, but we are in close touch with the NFU and other stakeholders, because we know that there are concerns on the timing of entry into force and transition. We are working through those issues. Emma, do you want to come in?

As the Secretary of State said, we cannot give a running commentary on the content. I can say that while the summit that was planned for later this month has been postponed, the actual negotiations themselves have continued in earnest, with multiple sessions between EU and DEFRA teams each week. We are making good progress on many of the issues that we have been working through. I am confident that we will be in a good place to proceed as soon as a revised summit date is agreed. In parallel to that, we are proceeding with all our implementation plans so that, as soon as an agreement is in place, we are able to move forward with the quite considerable implementation that comes with the SPS agreement. A big part of that has been continuing our business readiness support. As I am sure you have seen, we have already published two sets of business guidance to help industry understand some of the changes that come with dynamic alignment, and some of the areas where things remain the same, so that they can start early preparation. As soon as the negotiations conclude, we will provide further information to give a more detailed sense of what the implementation requirements are, and continue the support around that.

I appreciate that you say you cannot share details with us, but the relationship once SPS is in place very much concerns me. With dynamic alignment, we will become a rule-taker rather than a rule-maker. Where will our influence be? I know that Norway and Switzerland have said that they always have to try to influence up the chain, but once it is in front of the legislators, it has gone. The farming road map includes various different proposals for regulatory simplification, animal welfare and innovation, much of which overlaps with the scope of the SPS agreement. How will you deliver this strategy when the key decision making will be outside our control?

I know that you are not saying this, but not everything in the farming road map is in the scope of the negotiations.

No, just those particular areas.

For those areas that are in scope, we will have a different relationship with the EU, as you described. While you are right that we will not have a voting role because we will not be a member state, we are negotiating what is described as “decision-shaping arrangements”, which are set out in the common understanding and are the basis on which we are negotiating the agreement. That has a number of elements to it. The first is having access and contributing to the EU’s agency systems and databases. That is important because that is how we feed our science in. That is how we feed in our understanding of things like animal and plant risk—a health-risk issue. That science and data are an important input to the EU’s assessment of future regulatory reforms and its policy-development process. We are a contributor to that system. The second element is the role that we have in the EU’s range of different working groups and expert groups. While we would not be a voting member of those groups, one of the areas that we are discussing with them is what role we can have in contributing to those groups. The tenor of our conversation has certainly been that we want to be a valuable member making a full and active contribution to those groups to support the best possible policy and legal frameworks coming out of a shared SPS area. Linked to that, we are also thinking about what we do domestically—our work with industry, with the scientific community and with devolved Governments—to make sure that we are in the best possible place to make that contribution and are drawing together the best possible representation, science and information to feed into that process. You are right that it is a different relationship, but it is still an important and influential relationship.

It is interesting that you are stressing the contribution. My fear is that we still do not have a proper seat at the table or a more effective voice, and things will just depend on what way it goes. One question at the moment is that the EU itself is divided over its policy around live animal transport. I know that that will be a big issue. It cannot quite decide on time limits, which will have a massive impact on our rural constituencies. What are you doing at this point to protect UK interest, as it stands, before we even get into the SPS and things like that?

You are right that in the vast majority of areas, the intent of the SPS agreement is that we will dynamically align with EU regulations. However, as the common understanding sets out, in a small number of areas we will be seeking exceptions to maintain UK regulatory arrangements or transitional arrangements. In a small number of circumstances, we would expect to maintain UK standards and rules, but overall the intention is that we are a contributor to that system. I would not underestimate the value that we can bring. Certainly, in conversations that the Secretary of State, my team and I have had with a range of member state colleagues, there is a recognition that the science and expertise that we bring from industry are valuable and will be at least influential in considering the future direction of travel.

Can I put a pitch that we are not just a contributor but a director of this whole thing? I think that sometimes we underestimate our abilities at the negotiating table; we should be much, much stronger. One thing that we are worried about is that there seems to be a delay in the parliamentary scrutiny of EU legislation, like the food and feed regulation. Do you think that you have sufficient resources? We know that there has been a big call to reduce the workforce under DEFRA, but at the same time, a huge element of scrutiny will be required. What are we doing to prepare for that?

As we discussed when I was here with the permanent secretary a few months ago, we have invested significantly in ensuring that we have prioritised resources into supporting the transition to EU reset. Some of that is temporary because it is about supporting the change required to be ready for implementation. However, you are right that, as part of that, we are thinking about what our longer-term operating model will be to ensure that we are set up for success for that decision-shaping role. That is not just about DEFRA, though. That is about the relationships we have with the devolved Governments and how we are putting a UK-wide representation into that system. Yes, it is an internal question, but it is also an external question, to make sure that we are pulling that together into a coherent and effective operating model.

In terms of EU resources, we are worried about the illegal meats transfer. Northern Ireland has access to databases like the rapid alert system for food and feed, and yet it is still struggling with the entry of illegal meats. What confidence do we have in that system that will help us to tackle our issues?

It is important to distinguish between the issues that relate to the lawful movement of commercial consignments and the unlawful movement of commercial consignments. The SPS agreement is about a change in the arrangements that we have in relation to the lawful movement of commercial consignments. We have just described the different arrangements that we will have in place. In short, it shifts us from an arrangement that is based primarily on certification and checks to an arrangement that is based on traceability, on the sharing of intelligence and on the response that comes with that, whereas the illegal meats issue broadly is about the unlawful movement of products. In many ways, that is outside of the scope of the SPS agreement. That is about how we are using our existing full range of powers to identify those consignments and take action; for example, how you use your customs powers, how you use your food safety powers—the full suite of areas. That is one of the things that we are actively looking at in parallel with, not instead of, the SPS agreement. As Baroness Hayman has previously mentioned, we are preparing work on an illegal meat action plan for the autumn, to take a full holistic view and set us up to tackle some of those issues, which have been of significant interest to this Committee post-SPS agreement.

We will welcome seeing that, because it is something that this Committee has been very concerned about for a long, time and we need to see more action. In terms of what we can and cannot bring into the country, when we last spoke, it was said that 90% of travellers were aware of the rules on personal imports of meat and dairy from the EU. We challenged that statistic, and it came out that it was nearer 19% of people. We have all travelled in and out of Europe recently, and the signage is insufficient— especially when you consider that some Committee members had our shoes dipped as we were going through in New Zealand. Baroness Hayman has talked a lot about having to rely on the good will of the travel sector to make these changes. Can the Government do anything more in the interests of protecting this nation?

I heard from members of the Committee about your visit. I did not hear about the dipping, but I did hear that it was pretty strict and that there were lots of posters up. We are working with ferry companies and Eurostar to ramp up the communication and improve awareness.

To clarify the statistics, you are right that, in that baseline survey, 19% of respondents were aware of the change in rules. It was 69% of those respondents who have travelled to the EU more recently. I completely take your point that there is more that we could and should do, because that should be at 100%, but it is not quite as bad as that implies. None the less, we are not resting on our laurels. As the Secretary of State said, there is a whole range of things that we are trying to do to improve understanding and awareness, and the effectiveness of that. We are working with the ferry companies, DFDS particularly, and with Eurostar and LeShuttle. As I am sure anyone who has travelled on those recently knows, customers receive a notification about those requirements before they travel and often before they return as well. We are working with the Foreign Office and its Travel Aware partners network to get the message out, and with Border Force. If you travel by coach from Calais or Dunkirk, it appears on the TV screens in the departure lounge, as well as a more active social media drumbeat led by DEFRA. We have also secured some additional funding through the integrated security fund to support this wider comms effort. The data that Baroness Hayman shared with you was part of that. It was about improving our baseline understanding of what we need to do. It falls as part of a wider suite of interventions that we are undertaking to look at personal information.

As a final plug, on the SPS it would be useful at some point if we could perhaps have the Cabinet Minister, Nick Thomas-Symonds, before the Committee—we have invited him twice, but he has not come—to reassure us about what is coming forward. Should he still be in place shortly, can I ask you to recommend that he come to see us?

We will take that away.

As the MP who represents the John Innes Centre, the Sainsbury Laboratory and the Earlham Institute among others, I am concerned about precision breeding. It is a huge British advantage that we have going into these negotiations. The memorandum of understanding noted that there would be carve-outs for certain aspects of this. However, there are concerns within the sector, following the recent court trial against the Government, which found that we have to go back into the precision breeding legislation for various reasons, that that will not be used as a Trojan horse to water down our first-mover advantage. Is that your view, Secretary of State?

We are discussing with the EU how we come to an arrangement on these issues. It is difficult for me to get into the detail, but as Emma said—the other Emma—in the common understanding, there was a commitment to look at both exceptions and transition periods. The EU is also interested in more innovative farming practices that help its industry to become more resilient.

It introduced legislation to the Parliament just a few weeks ago on exactly this topic. We have also done quite a lot of engagement with member states and businesses across those member states. I was in Spain last week, for example, talking to farming colleagues there, and they were describing the potential that they see and the positive benefit that this can bring to the EU in us developing this science, and the partnerships that had formed across UK and Spanish businesses in this area. To go back to Ms Bool’s representation encouraging us to be stronger in our representations, I can assure the Committee that we are being strong in our representations.

The concern that we have, comparing the legislation framework that the EU is bringing in, is that it is more of an end-user approach rather than the scientific input approach we go for in the United Kingdom. If we end up following that approach, we may not be able to be led by the science and the innovation that comes with it. My question dances around the issue of direct SPS but indirectly affects it: would we ever consider labelling precision-bred materials? I would strongly argue that we do not go anywhere near that

There is a range of different issues that we are working through with the EU at the moment, and we would probably need to come back to you once those negotiations have concluded.

We will call that a maybe, then. Will it be within our control? Will it be our decision?

It is still in active negotiation, so yes.

It is extremely concerning for the sector if we go for a labelling approach.

It is an ongoing negotiation and that is a live negotiation issue—not labelling specifically but precision breeding and exception. I do not want to bind the Minister’s hands while we are still in that live negotiation process.

I sense that we will get no more out of that, and we are running down the clock, so I will move on, tempting though it is to explore it further.

I have two questions, Secretary of State, on coastal erosion. You will know that this year has been one of the worst years in recent times for coastal erosion, particularly on the east coast of England. In my constituency alone, we have lost 11 homes since October. The Committee submitted a report to your Department with a series of recommendations. We were disappointed with the tone that came back. We felt that, on the whole, it is an incredibly emotive topic, and the response did not acknowledge some of the emotions that we are trying to address from the human side, but I will not dwell further on that. My questions relate to the coastal erosion assistance grant—I have spoken to your Department about that, and it was raised in our report. Your response came back acknowledging that raising the grant from £6,000 is being looked at. Your response says that by 1 April next year, you are hopeful that it will be raised. In the case of my constituency, demolition costs are not covered by that £6,000 grant. It costs up to £50,000 to have the privilege to demolish your own home, at force. If over the next year, as we go into the next winter, homes are lost either in my constituency or elsewhere and the grant is not in place by 1 April 2027, will the Department step in? Will the EA step in? We know the direction of travel is that it will be a higher grant. Can we get some reassurances that homeowners will not be left to cover tens of thousands of pounds for the privilege of demolishing their own home?

I know that time is short, but it is important to say that I see that there is a human impact to people losing their homes. I do not think any of us would want to be in that position. I am sorry if you felt that that was missing from the response. We have set out positive action against six of the eight recommendations from the Committee. I want to thank the Committee for its recommendations on this issue. The EA has committed to reviewing the coastal erosion assistance grants—both the amounts available and the criteria to qualify for those.

On timing, I have, hopefully, some positive news. We aim to get that work done by summer this year. We will go faster than the timeline that you recommended in your report, so we are getting on with it.

Thank you—that will be a welcome relief. You will know that the impact of coastal erosion happens over winter with the higher tides and so on. That is really good. Hopefully, your next answer will have the same good news. We also recommended adopting the Flood Re approach, with an Erosion Re or a Coastal Re. Ten thousand homes in England are at immediate risk of being lost to coastal erosion. Over the next 50 years, 200,000 homes in England will be deemed to be at risk—not immediate risk. In your response to the Committee, you said that people often buy their homes in the full knowledge that they are living in a coastal erosion risk area. I would argue that, given the pace of coastal erosion and climate change, those 200,000 people who will be brought into the wider at-risk spectrum will not have bought their home today or tomorrow in the full knowledge that their home is at risk of coastal erosion. I would urge you and your Department, Secretary of State, to look at that again. It will not go away. We know that tens of thousands of homes will be at risk. The Flood Re model works, and an Erosion Re model is something that we should start to look at as a Government, even if only in a road map sense. Could you give me the same good news that you just gave me a moment ago? Is this something that you would look at, even if only to start explanatory conversations and explore how it could look, so that, in a decade’s time, we are not literally looking over the cliff edge?

I completely take your point about the increase in the numbers. I will say a couple of things and then turn to David. MHCLG is looking at what more can be done for the sales packs for conveyancing to make sure that they include information on environmental risks such as coastal erosion. The insurance question is difficult because there has to be a viable market.

Our focus is first on better information around home-buying, and we are working with MHCLG on that. On the question of whether a Flood Re-style intervention would work, our concern there is essentially about whether there is a viable insurance market for homes at risk of erosion because, by definition, the prospects of that erosion are certain over time; it is inevitable, and historically it has been a market that is uninsurable. Is there therefore a case for some intervention as opposed to a Flood Re-style reinsurance market? We would say yes. On other aspects of your recommendations, our focus is on looking at other interventions, such as we are doing through the coastal adaptation pilots around alternative financing models, selective purchase and so on, all of which, as we work through the pilots—which, as you will know, we are targeting at the most at-risk areas of the country—we will explore for scalability into further nationwide schemes. We agree with the spirit of what you are saying; we are just not convinced that an insurance market-style intervention would be the right mechanism for that.

It is a fair point. We are working with local authorities on their shoreline management plans, and talking to them about how best they manage that.

In respect of joint work with MHCLG, for example, we will be seeking to make sure that the new national planning policy framework, which it owns, takes more account of shoreline management plans and more account of the national coast erosion risk map for future development. Beyond that, you will know that the Environment Agency’s national flood and coastal erosion risk strategy is due to be refreshed. We and the EA will be making sure that the inputs into that strategy draw very heavily on the views of local authorities and other Departments with a stake in that world.

We are working very closely with MHCLG on that issue, and with colleagues who have been affected. We know that this is something that we have seen last year, and there are worries about some of the incidents we have seen this year as well.

You have largely covered it. We see this very much as a joint piece of work with MHCLG across the full wildfire cycle. We are embracing risk anticipation and assessment through to prevention, preparedness, response, recovery and climate adaptation. For exactly how we articulate that, we can take your point of a strategy away, but the joint work is being done across Government.

The requirement of owners of banned dog breeds to hold third-party liability insurance has been removed due to market availability, and the risks are the same. What is the impact? Who carries the cost if injury or damage is caused by the dogs?

This is a sensitive issue. There have been a number of deaths and other incidents recently and my heart goes out to the families affected. The problem that we had is that there was not a viable market for this. We have looked carefully at what more we can do, and across Government we are considering, including by talking to the centre of Government, whether there are any rules that we need to change and whether we need to look again at the legislation on dangerous dogs.

Can you be more specific?

No, but I can come back to you.

As things stand, there is no insurance for these dogs?

No.

Is that a satisfactory state of affairs?

I would rather not be in this position, but that is where we are.

They are still there, out in the streets.

That is why we are looking at what more we can do with the legislation and some of the rules around this.

We are out of time, I’m afraid. We will maybe pick that and another couple of matters up in correspondence. We have covered quite a lot of ground today, so thank you all very much indeed for your attendance. There are doubtless other points that we will be coming back to you on. For the moment, that concludes our proceedings for today.