Written evidence submitted by the NFU (EPU0020)
Introduction
1.1. The Committee previously published a report on the ELMS and the agriculture transition in October 2021 and received the Government response in January 2022.
What progress has the Environmental Land Management Schemes (ELMS) programme made since January 2022?
2.1. Contrast the uncertainty of the ELM proposition with the clarity of BPS payment reductions, unprecedented input inflation and market instability created by Ukraine, and it is hardly surprising that farm business confidence to invest in the future Agricultural Transition Plan (ATP) schemes is being undermined. The only certainty businesses have had in the last 2 years is the cut to BPS payments. In 2024 direct payments (currently paid as BPS) will be reduced by a minimum of 50%.
2.2. With the current global food crisis farmers have a global moral responsibility to play their part in focusing on food production. Agri-environment schemes should not undermine the country’s ability to produce food sustainably.
2.3. The early roll out of the Sustainable Farming Incentive (SFI) (being the first element of ELMs) offer of three soil standards has evolved from the Defra outline in November 2020 which promised an offer available to all farmers in 2022. We await finalised details of the Animal Health and Welfare Pathway review; testing is taking place at this time. Defra is developing new standards to be introduced each year until 2025. There are gaps in the proposed offer: for example, enabling English farms to begin their Net Zero journey is largely absent from the immediate SFI standards, similarly there is no support for public access, education or engagement with farming and nature.
2.4. It is not clear whether all farming sectors will be able to engage in SFI. Intensive horticulture is one of those sectors, even though there is a standard proposed for 2025, the lack of development in this area means there is a low level of confidence and knowledge amongst growers. Areas of lowland peat (which are often used for highly productive vegetable and salad production) have no specific provisions proposed that ensure SFI works for these farming systems.
2.5. In January 2022, Defra published high level information on the second and third elements of ELMS, namely: Local Nature Recovery scheme (LNR) and Landscape Recovery (LR) scheme. Landscape Recovery (LR) pilot is moving into a project development phase after it closed for bids in May. Stakeholders await announcements. The LNR scheme remains extremely light on detail. There is an indication of the types of activities that might be paid for but, little more.
2.6. It is unclear how SFI and LNR schemes within ELMs relate to each other. Likewise, it is unclear how existing agri-environment agreements (for example Countryside Stewardship (CS) and Environmental Stewardship (ES)) relate to or can transition smoothly into ELMs. Farmers and growers need this level information now to understand if there will be a viable ELM offer in the future that will work for their business. Without this information there is a fear that entering the schemes now may lead to missing out on a better offer later.
What have farmers’ experiences been in applying to the Sustainable Farming Incentive (SFI) since its launch on 30 June 2022? How effectively has the scheme used the feedback from the SFI pilot? What are the timescales for launching additional standards under the SFI?
3.1. The arable and grasslands soils standards do not dovetail well for mixed arable and grassland rotations. Field vegetable and sugar beet growers do not have a suitable crop rotation to deliver the 70% winter green cover requirements. These crops are late harvested (practically, to supply the factories sugar beet is harvested between September and March) preventing that ground from having green cover in place between December and February. Most grassland systems based around permanent pasture can only enter the introductory level, as establishing a herbal ley is extremely difficult in an existing sward. In both cases the SFI payments are not an incentive to change their systems. Unimproved grassland does not qualify for these standards.
3.2. It is too early to tell how the SFI Animal Health and Welfare Pathway vet visit review will operate. It remains unclear how this offer joins up with the wider SFI land-based offer.
3.3. Those that can currently apply online (applicants with no existing agri-environment scheme or common land) have found the online application straightforward. Some have received agreement offers very soon afterwards. However, it still takes time to understand the guidance and consider the practicalities of how it works on farm before applying. In addition, there are still farmers and growers facing technical difficulties with the online application platform that needs to be ironed out.
3.4. The delays to allowing CS and ES agreement holders to apply online is putting them off applying for SFI. They can call RPA to apply, but that is time consuming. This affects approximately 30,000 farmers in agreement. The expectation is the online services will be available soon, but it will be much harder to re-engage them at a later date.
3.5. Entering common land will be more complicated due to the need to engage all parties involved in a common. Many commons associations will need time and financing to set themselves up to apply for SFI.
3.6. Learning from the 2021 SFI pilot has been used to shape the scheme and guidance. The pilot highlighted a gap in provision for uplands, which has been partially addressed with a moorland offer in the main scheme. Unlike the pilot, SFI 2022 offer is available on fields included in CS. The main SFI scheme is written more clearly, with the mandatory requirements more obvious and much less supporting guidance. This change is welcome. Applications appear to be turned into offers more quickly.
3.7. Farmers and growers, already feeling the impact of direct payment (BPS) cuts, are looking for the wider ELM offer to manage the impact. They need the detail to establish if there is a real viable business offer. The phased introduction of SFI standards until 2025 means the complete scheme detail required to make those critical business decisions will not be available until 2025. This is too late for many businesses. There is a need to roll out SFI in a way that allows all sectors impacted by direct payments cuts to access ELMs.
3.8. Those already in existing agri-environment schemes find it difficult to see how SFI will provide necessary income that is being lost to direct payment reductions. For example, upland farms, many of whom are in long-standing agri-environment schemes, only have access to the SFI introductory moorland standard until 2024. This pays £10.30 per hectare, which needs to pay for the required actions, not making up any of the income losses from in BPS. In 2024 when the moorland standard is extended, there will also be low input grasslands available and a stone wall standard available in 2025. In addition to these standards, there needs to be more options available to make a rounded upland offer. LNR may provide this support and this is due to start in 2024, but as started earlier, details are sparse. These will be the first potential opportunities in ELM to access that released budget, assuming there is no double funding. By then they will have lost at least 50% of their direct payments. Farmers already delivering for the environment through existing agri-environment schemes are not confident they will have a viable business without direct payments.
Is the Government on track to get 70% of farmers, covering at least 70% of farmland, to take up Sustainable Farming Incentive agreements? How have recent changes in global food prices impacted on the attractiveness of the financial incentive in the schemes?
4.1. Government’s ambition is for 70% coverage by 2028. Before 2028, Government should be aiming for higher uptake within SFI. To secure high uptake, Defra must design ELM in a way that farmers and growers, the majority of England’s land managers, will engage. It needs to be:
• Simple to understand and apply for,
• It needs to work with farming systems, rather than removing land from production,
• There needs to be a comprehensive offer which is inclusive of different farm types and tenures,
• It needs to build on good practice,
• The financial rewards need to offer an incentive to encourage engagement.
4.2. Current plans are for 15 SFI standards by 2025, each with three levels of ambition (in effect 45 new measures, in addition to entirely new LNR and LR schemes). There is a need to ensure the coherence of the ELM offer in totality, as well as with other ATP components, such as the infrastructure grants. Taken together we have received feedback that the offer already feels complex and overwhelming at a time when there are multiple other competing demands on farmers and growers time and attention. A small example would be proposed requirement to produce ‘plans’ for individual SFI components, each of developed. The concern is that collectively the actions required could be a bureaucratic to deliver and administer. There is a need to focus on the basics of the scheme, with the aim of reducing duplication and administration. Where actions deliver multiple benefits, these should be rewarded. The development of a new delivery platform should make this possible.
4.3. Defra says that SFI standards and LNR options can be stacked, where they are compatible, to create an attractive offer. These are warm words, but without the detail. The example set with SFI is where an existing agri-environment agreement is in place SFI cannot pay for the same activity or outcome. For grassland farmers in existing agreements this does mean that they cannot currently enter the SFI grassland soils standard and it will be 2024 before there is a suitable SFI standard.
4.4. AHDB research indicates that SFI payment rates are not sufficient to incentivise a change in farm practices to deliver SFI (completed before the current market issues). Returns from agri-environment schemes have only contributed on average £5,200 to farm incomes . Reflecting the current offer and previous experience of agri-environment schemes, many farmers will think twice before engaging. On the back of our own analysis the NFU has strongly encouraged members to look at what the SFI offer means for their own farm businesses.
4.5. The NFU is concerned that global market instability and inflation means that the SFI and CS payments may not reflect true costs e.g., CS capital grants are based on payment rates calculated in 2014, not reflecting recent price increases. Defra reviewed some payments in January (before the current market instability). In the short-term Defra needs to review payments for CS capital items and Higher Level Scheme (HLS) agreements. Within all ELMs schemes Defra needs to carry out regular payment reviews, while giving certainty to agreement holders that they will not disadvantaged. This needs to cover all schemes in delivery, such as productivity grants, not just ELMs.
Is ELMS on track to start piloting the Local Nature Recovery and Landscape Recovery schemes in 2022?
5.1. Moving all agri-environment schemes onto domestic regulations, as recently announced, is welcomed. It will enable agreements to transfer into ELMs more smoothly, equally it allows for longer HLS roll over agreements, giving some certainty. There is a need to reintroduce capital works for HLS roll overs. Farmers in agreements need confidence that the full suite of options, including maintenance options, available in CS will be available in LNR. The lack of detail, the focus on ‘nature recovery’ and Defra narrative that LNR will be ‘more ambitious than CS’ does not give farmers and growers that confidence.
5.2. Piloting of the Landscape Recovery scheme has started. The scale of the projects and required land use change, taking land out of production, would be challenging for the vast majority of farmers to engage with. For many farmers and growers, moving to a non-agricultural land use will have tax implications. This will be a barrier to uptake. We look forward to seeing how the pilot bids work with farmers and tenants. These will be complex projects to develop, two years may not be enough to fully test prior to full roll out.
5.3. There is a need for both schemes to be ‘tenant proofed.’ In both schemes the actions supported include permanent land use change. Agricultural tenancies, generally, do not allow for land use change. They require the land to be kept in a state of ‘good husbandry.’ As a third of land in England is tenanted, and two thirds of farmers and growers are tenants, the Government should not underestimate the scale of this major barrier to engagement in both schemes. The tenancy legislation is problematic and needs updating. The design of ELMs needs to develop an approach built around collaboration between landlord and tenant. Commoners share these same concerns.
How effectively is the Government communicating and engaging with farmers and other landowner groups about the progress of ELMS?
6.1. Defra is activity engaging with farmers and growers. They have a greater presence at shows and events to talk to farmers and growers. There is also a greater use of social media. The twitter engagement is primarily through Janet Hughes, Defra Director. Not everyone is on Twitter. There is also a need to use more traditional routes of engagement to achieve reach e.g., printed material.
6.2. Defra is making extensive use of the Future Farming Blog to communicate development. These frequent blogs are high level aimed at both the general public, farmers and growers. The information needs of these two audiences are very different. Often, they can repeat existing information, maybe just adding one nugget of information. We are also concerned as to the reach of the blogs within the farming industry, especially those who are digitally challenged. We can understand Defra is trying to break down the huge volume of complex agricultural transition scheme information into bite sized chunks. However, it makes it difficult to keep track of new vs repeated information. This can make it difficult for stakeholder organisations to disseminate information without appearing to repeat ourselves.
6.3. Overall Defra’s engagement with stakeholders has improved across both scheme development and SFI roll out. There is always a thirst for more engagement to shape the scheme to ensure it is deliverable on farm.
Should the Government change the focus on the ELMS scheme and/or the timescales for implementation given the current pressures on farmers and facing UK food security?
7.1. In light of the current market conditions, it is timely for Defra to review and evaluate the approach to agricultural transition. In response to the global food crisis there is a need to ensure farmers continue to deliver sustainable food. Government's approach to transition is predicated on the assumption production costs would on average fall significantly, rent prices will decrease and farmers and growers would be able to increase outputs. Given the significant changes in the economic outlook in recent years and months, Government should conduct an updated economic assessment outlining the economic impact of the schemes for all farm sectors in both 2024 and 2028. They should do this as a matter of urgency. Given the levels of uncertainty, a scenario analysis should outline the range of potential outcomes which could emerge for farm incomes during these periods.
7.2. The impact of Ukraine has demonstrated that these fundamental initial planning assumptions are now flawed. All costs are increasing from seed and fertilizer, through to labour, machinery, and energy costs. Farm input costs are rising far quicker than output prices. Even before the Ukraine crisis, there was no evidence that rents were falling. At this difficult time farmers need to focus on their core business to remain viable into the future. The bottom line for most is that a viable farm business is needed to underpin ELM delivery.
7.3. The NFU’s Domestic Agricultural Policy (2017) proposed a framework formed of three distinct constituent parts: agricultural productivity measures, volatility mitigation measures and risk management tools, and environmental measures and incentives. Farm businesses should be able to draw down bespoke assistance from across a range of measures within each of these essential cornerstones. Crucially these measures are not mutually exclusive. They all work together to enable farming to be competitive, profitable and progressive – producing food sustainably. A rounded offer, not just one which focusses heavily on ELMS, needs to be available beyond the transition period. Alongside this there is a need for budget transparency on how finances released from BPS are being returned to farmers.
7.4. Returning to the current offer from Government, to help businesses with volatile markets there must be greater priority and increased budget given to boosting agriculture’s productivity through capital investment and applied research.
7.5. Within Defra’s ATP, Net Zero needs to be given the priority it requires. Net zero needs to be embedded into schemes and given equal weight to other environmental targets. The approach to Net Zero needs to support the full range of activity including resource efficiency, renewable energy and the bio-economy, in addition to nature-based solutions.
August 2022