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Third Standing Committee on Delegated Legislation
Tuesday 19 October 2004
[Mr. Mike Hancock in the Chair]
Draft Financial Assistance for Young Farmers (Northern Ireland) Order 2004
2.30 pm
The Parliamentary Under-Secretary of State for Northern Ireland (Mr. Ian Pearson): I beg to move,
That the Committee has considered the draft Financial Assistance for Young Farmers (Northern Ireland) Order 2004.
It is a pleasure to serve under your chairmanship this afternoon, Mr. Hancock.
The order was laid before the House on 15 September 2004. This proposal to assist young farmers is being introduced in accordance with EC regulation 1257/99, which permits setting up aid to facilitate the establishment of young farmers, under 40. Under the regulation, aid may take the form of a single premium or an interest subsidy on loans, with aid limited to a maximum è30,000. To obtain fast-track state aids approval, the scheme must comply with the regulation.
The aim of the scheme is to encourage young, progressive farmers to invest in innovative measures that will make their businesses genuinely competitive in a more open market following common agricultural policy reform. The proposed scheme has been through an extensive consultation process that sought views from a broad range of stakeholders, including farming groups, local political parties and financial institutions. The consultation showed broad support for a scheme providing assistance for young, new-entrant farmers.
Some consultees raised the possibility of introducing the scheme in the form of a single premium instead of, or alongside, the proposed interest rate subsidy. We considered that carefully, but research commissioned by my Department concluded that the interest rate subsidy option represents much better value for money than a single premium payment and would be used more productively to develop the farm business. Furthermore, the interest rate subsidy option has the advantages of tying the assistance to commercial decisions and requiring the applicant to present a business plan to a lending institution and demonstrate a commitment to the development of their farm.
The scheme offers a real opportunity for young men and women who wish to invest in farming in Northern Ireland and represents a substantial investment by Government in the agrifood industry. It will challenge young farmers to come forward with innovative projects to deliver a positive impact on farming and the Northern Ireland rural economy.
We estimate that the scheme will cost £4.5 million and will lever in an additional £18 million of investment to farms during a five-year period. In line
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with the EC regulation, the proposed scheme has several conditions requiring competence in farming and adherence to environmental and animal welfare practices. However, I am confident that the conditions will not be a barrier to applications from most of Northern Ireland's young farmers, as they are part and parcel of what is regarded as responsible farming practice.
I firmly believe that the scheme will provide a stimulus to much-needed investment in income-generating activities in Northern Ireland agriculture.
2.33 pm
Mr. James Gray (North Wiltshire) (Con): Welcome to the Chair, Mr. Hancock. I do not intend to delay the Committee unduly. However, as is always the case with a new scheme such as this, there are important questions that it is worth asking Her Majesty's Government.
My party welcomes the scheme. In Northern Ireland, as across the United Kingdom, there is a real difficulty in getting the younger generation into farming. This is not a matter for the Committee or the Minister, but I hope that his colleagues at the Department for Environment, Food and Rural Affairs might consider a similar scheme for mainland United Kingdom in the future. It really is a most worthwhile way of attempting to get the younger generation into farming.
The awful truth is that 55 per cent. of European Union farmers are aged over 55. Within 10 years, more than half of Britain's farmers will approach retirement age. Slightly better figures of about 52 or 53 per cent. are quoted for Northern Ireland. None the less, with farming in its present state, the truth is that a farmer's son or someone with an interest in farming would seek to do almost anything other than go into farming. The likelihood of earning a lot of money as a bus driver or by doing any of a variety of other things is much greater than it is for a farmer.
My party welcomes the principle behind the scheme, but the Minister might like to enlighten us on several matters. We join the Secretary of State for Northern Ireland in his expression of hope that the institutions of devolved government in Northern Ireland will be up and running quite quickly. He has indicated that there may well be a breakthrough in the next two weeks, and we all very much hope that that is the case.
If that does happen, will the devolved institutions have an opportunity to amend the order? They may take a different view on some of these matters. To be honest, I am unclear about the procedure. If we make the order in its present form, will civil servants or Northern Ireland as a whole be able subsequently to consider it? I hope—
2.35 pm
Sitting suspended for a Division in the House.
2.50 pm
On resuming—
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Mr. Gray: It seems only the other day since I was last rudely interrupted while on my feet at the Dispatch Box. I hope that it was not something I said then; I am sure that it was not something I said today.
Her Majesty's Opposition welcome the broad principle behind the scheme, which seems to be a good one because of the age profile of farmers, if for no other reason. The previous attempt to do something similar happened after the first world war when county councils bought in farms for start-ups. Almost all are now too small or do not operate properly, and we need to find a way of bringing young people into farming. The order is a good way of doing that, and we broadly welcome the principle behind it. However, I have a number of questions.
I understand and support the Minister's point about the payment of interest on bank loans rather than capital grants. That seems eminently sensible, not least because the banks will be able to make a reasonable assessment of whether a farm is commercially viable. The Government will effectively pay the interest on those loans rather than making them, and that seems to the Thatcherite wing of the Conservative party to be a good thing, even it is not a Labour party sort of thing. We welcome the principle, but I have some worries.
Presumably the scheme is designed to help those who would not normally get a bank loan. If they can obtain a bank loan at reasonable commercial rates, why is it necessary for the Government to subsidise the interest? If the scheme is aimed at people who are enterprising and young, as the Minister said, but cannot currently borrow the necessary money to set up a farm, how will the Minister ensure that they are able to get it from a bank under the scheme? What will the dialogue be between the vendors and the Government so that lenders are encouraged to lend to people to whom they would not otherwise lend? Will the Government consider making capital grants at some stage? There may be circumstances in which it is sensible to provide a start-up grant rather than just interest payments.
We are a little concerned about the definition of new entrants. It is right that people should be under 40 and have good commercial sense, enterprise, initiative and all those things that the order properly sets out. However, some people will not entirely fulfil the textbook definition. For example, if the children of a tenant farmer seek a grant, will they qualify as new entrants? They may be working on their father's farm already, so they may not, technically, be new entrants. An exact definition of ''new entrants'' would be useful to ensure that we do not exclude people who, logically and sensibly, might otherwise be encouraged to set up.
The scheme is restricted to applicants who have been in business for not more than 12 months before making the application. I understand that there was some discussion about whether the period could be 36 months. Twelve months may be a very short time to be in business before an application is made. Has the Minister considered extending it slightly to two years or even 36 months? We seek flexibility so that the order fulfils its purpose.
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Mr. Peter Luff (Mid-Worcestershire) (Con): Before my hon. Friend moves away from definitions, will he probe the Minister on an encouraging aspect of the order—that 40 is now young? Will he ask how the Government reached that view?
The Chairman: I hope that the hon. Gentleman will not go too far down that probing line.
Mr. Gray: I am sure that you would not be the slightest bit worried if I did, Mr. Hancock. May I just say that when I took my teddy bear to the Royal United hospital's Ted's big day out in my constituency and challenged some young people to guess how old it was—it is the same age as I am—I was slightly disconcerted to hear that the average guess was 56, which was a bit rich? Forty seems to be not a bad age to specify in the order; if it were 30 the applicants would be very young; if it were 50, I fear that—
The Chairman: You must tell us the age of the teddy bear.
Mr. Gray: The teddy bear is 49—precisely the same age as I am; 7 November is the date, and 1954 was a vintage year. We are nearly 50.
So, 40 seems a goodish age. More than 40 would be too old; less than 30 would be too narrow a definition. I think that 40 is probably not a bad age to have chosen.
Other definitions need to be clarified, however. I welcome the expression ''setting up'' not least because my regiment, which is the oldest in the British Army, has the charitable purpose of setting up soldiers. By and large, the meaning of the phrase ''setting up'' is clear, but it would be useful for the Minister to describe precisely what he means by ''setting up'' in the context of the order. Does he mean setting up a farm from scratch—in other words, a brand new venture? Or will he allow a degree of flexibility about setting up?
There is the question of children who are already involved. They may be working on the farm, but not in the senior management position. Might they be allowed to apply because they have not yet attained their own farm? Would it be useful to define the precise status of the children?
Why has the Minister chosen to require that the loan be repaid in five years. That seems quite a short time. Some of the investments will involve long-term vision. If people come into farming at 30 or 35, we hope that they will be thinking 20 or 30 years ahead. Why do they have to repay the loan within five years? Might not 10, or even 15 years, be easier for them?
There is a cash-flow consideration. If farming remains as it is and farmers borrow the money and have to repay it in five years, is there not a risk that they will, for example, end up having to sell capital equipment to repay the bank loan at what is not a good time for them? Should the length of the loan not be extended so that farmers can repay us satisfactorily, taking into account their cash flow? They will have to pay the interest on a monthly basis. On cash flow, it would also be interesting to know whether payments from the Department will exactly match, in monthly terms, repayments to the bank. It would be unfortunate if the interest payments by the farmer
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were made at a different time of the month from the payments from the Department. It might be useful to ensure that there is no cash-flow problem.
Broadly speaking, I welcome the fact that the activities for which the grants are available must be enterprising and pioneering. That is eminently sensible. We do not necessarily want grants to be for entirely ordinary and run-of-the-mill farming. Being enterprising and pioneering seems a good thing. None the less, one should not be too prescriptive in one's definition of enterprising and pioneering. Perfectly good farming enterprises for which the grants would be useful may well struggle to meet that quite demanding definition of enterprising and pioneering. The Minister used the word ''progressive'' in his introduction. Perhaps he should give us a little more flavour of what kind of farming enterprises he is seeking.
I come to the last of my questions about definitions. At the moment, the grants exclude the purchase of farm machinery. They are purely for cash flow, rather than for capital assets. However, there may be occasions on which the purchase of farm machinery is essential to setting up an organisation of the kind that we are describing. Would the administration of the scheme be flexible enough that, were a farmer to come up with a particular type of machinery that he had to buy in order to set a farm up for the first time, the Government would consider it? I hope that farm machinery will not be entirely excluded.
I hope that part-time farmers will be eligible. Nowadays, I am afraid that it is necessary for a large number of people do things in addition to farming. Sometimes, the other occupations are as obvious as bed-and-breakfast operations run alongside the farm, but sometimes they are more complex: people might drive lorries or run shops. I hope that the fact that those farmers might be described as part time would not necessarily exclude them from the scheme.
The scheme has a great deal to recommend it. I hope that it will be replicated in other parts of the United Kingdom. It will make a useful contribution to levering in funds. A total of £20 million to £25 million levered into farming in Northern Ireland will be a useful contribution at such a time as this. We think that the scheme is a good one, so long as the Government interpret some of the definitions with a reasonable degree of imagination and flexibility. We hope that it will give a useful boost to farming in Northern Ireland, and we are ready to give it a fair wind.
3 pm
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