Written evidence submitted by The Country Land & Business Association (ELM0030)

Date: January 2021

The Country Land & Business Association

The CLA is the membership organisation for owners of land, property and businesses in rural England and Wales. We help safeguard the interests of landowners, and those with an economic, social and environmental interest in rural land. Our 28,000 members own or manage around half the rural land in England and Wales – around 10 million acres - and run around 250 different types of businesses. Although CLA members run a wide range of rural businesses the vast majority are involved in farming and it is the majority income for over half.

CLA recommendations

Transition – enable business to plan with confidence

• The promises of more detail following the publication of the Defra Agricultural Transition Plan in November 2020, must be met as soon as possible with a full engagement programme. This is particularly relevant for the schemes that are being introduced this year – Farm Resilience programme, Farming Investment Fund, Slurry Investment Fund, Lump Sum Exit Scheme – and the Sustainable Farming Incentive.
• There is an urgent need for greater detail on ELM, particularly an indication of payment rates, so that businesses can make the right plans for the future with confidence. There is a risk that, without clarity on levels of income for environmental management in the future, farmers will feel they have to intensify production in the short-term to maintain income. 
• The payment rates for the SFI 2022 must be attractive to farmers/land managers in order to encourage their participation, take full cost into account and allow for profit. This will also apply to full ELM scheme.
• An up-to-date assessment on impacts of the early transition period, taking onto account the cuts in BPS and the likely income from SFI, must be developed.

ELM development – build confidence in the design and administration

• There must be a fast-track development and publications of SFI 2022 requirements and application processes and dates. 
• The SFI design must accommodate different farming systems and not be too prescriptive. E.g. Timing of spring grass growth varies by over a month between Cornwall and Cumbria.
• Government must ensure that current good practice is rewarded alongside new practice in all parts of ELM. 

• There must be full consideration and publication of the eligibility for current and future pilots and how they relate to existing Countryside Stewardship and entry into SFI 2022.
• The ELM National Pilots should be used as a platform to build skills and knowledge amongst farmers not directly involved in the pilot.

1. Is the Government’s timeframe for the national pilot, full roll-out of ELM and phasing out direct payments by 2027 feasible?

A 7-year transition period for the phasing out of direct payments between 2021 and 2027 is a reasonable period of time, and the CLA support a robust national pilot for ELM and have always preferred the option of a well-designed and fully tested scheme rather than early introduction. However, there are some serious short-comings in the current transition plans.

The main design problems are the misalignment of cuts in direct payments and the introduction of ELM, and the steepness of the cuts in the early part of transition before ELM is fully available to everyone. All current recipients of direct payments will have a cut of at least 50% by 2024 when ELM is fully available, and over 60% for the larger recipients. These are significant cuts for all businesses, and more so for those reliant on farming income and those in commodity crops or grazing livestock.

Based on Defra’s own statistics (Evidence Compendium 2019)

-          Only 25% of farming enterprises are profitable without direct payments

-          Direct payments make up 58% of profits across all farms, but over 70% for commodity cereals and grazing livestock businesses.

The Defra statistics provide a huge amount of analysis, but it is all based on averages from data 3-4 years ago, does not take into account the latest thinking on ELM, and cannot begin to assess the real impacts until there is greater clarity on the ELM payments.

At the heart of these changes are individual businesses, and all are unique in terms of farm type and system, location, size, and management. Businesses more reliant on farming are more at risk, and not all businesses have the same opportunities for ELM or diversification. A more detailed and up to date impact assessment is required to ensure that the transition does not have unintended consequences, and result in viable operations going out of business.

The early introduction of some parts of the Sustainable Farming Incentive in 2022 is a welcome intervention and will mitigate the effects of the steep early cuts to some extent. There is a lot of development work underway in Defra, but the lack of information on what will be required and the payment rates, means there is little clarity for individual businesses as to whether it will be suitable and how it will help to smooth the transition, which is Defra’s stated intention. Farmer and landowner expectations for the SFI are highly variable, with some considering it as a way to replace a significant portion of the lost income, and others thinking it will be of no interest. Either way, there are consequences for the business and the success of the programme.  See next question for more details.

The lack of detailed information is a serious barrier to planning for the future. It is recognized that one of the consequences of shifting towards payment for public goods is that the funding will not be distributed in the same way, but the publication of steep early cuts without an indication of likely payment rates for ELM, makes it difficult to plan for the future with any confidence, and may lead to short-term decisions that are not in the best long-term interest. The lack of information and ability to plan is a serious risk. At recent CLA webinars on the ATP, only about 50% of participants had made plans for how to replace the lost direct payment income.

2. Will the Sustainable Farming Incentive be a viable support measure for farmers before the full roll-out of ELM? Is further support required during the transition period?

The Sustainable Farming Incentive (SFI) offers the opportunity for farmers to access an alternative income source to  as Direct Payments are reduced, and to prepare businesses to enter the full ELM scheme in 2024. However, much will depend on the level of payment and what is required of farmers to receive it. The fact that the SFI is aimed at all current recipients of BPS means that it risks providing a standard approach that does not suit a very diverse sector that is affected by weather. For some land managers, achieving the level of sustainability set out in the SFI will be relatively straightforward but for others it may be a longer path. The CLA wants to retain a balance between rewarding those who have already invested in making their business sustainable and allowing those with lower environmental performance time to come up to the level that will be required in ELM.

The SFI payments alone will not be sufficient to support business adaptation in the early transition period. Modelling by the CLA, taking into account other spending commitments for the recycled direct payments, means that, at best, the SFI will reduce the BPS losses by about 50% by 2024. Clearly, these estimates are based on a number of assumptions and the impacts will be higher for businesses where the SFI standards are not suitable or if the SFI payment rates are not sufficiently attractive.

Investment in business adaptation, profitability and resilience will all be required in addition to the SFI to support businesses over the early transition period. The plans for the Farm Resilience Programme, the Farming Investment Fund and simplifications to Countryside Stewardship are welcome, but this will be targeted in different ways, and while they will support productivity growth in the long term, the productivity lag (the time between taking a decision to change/invest, and the impact), means that the benefits will not always be immediate. This problem is highlighted by the low level of current planning for the changes, so many businesses will only be considering actions from now.

It is a concern that the tightening of farm budgets due to the sharp cuts in direct payments before ELM is fully available, will mean some farmers will be less willing and able to invest in new technology, equipment and infrastructure that would drive productivity growth and mitigate the impacts of the cuts in direct payments.

3. How effectively has Defra engaged with land managers and other stakeholders on the design of ELM, including on the transitional arrangements?

The co-design approach is broadly welcome, as it gives an opportunity for feedback and input at an early stage of policy development. It is clear, however, that this is a fairly new approach for Government, and there have been some teething problems with both stakeholders and Government over how best to achieve genuine co-design. One issue is about how much information is shared, when and with how many people. It is important that when stakeholders and land managers are asked for input, it is meaningful and leads to genuine changes to policy design where needed.

It is also worth noting that while engagement in the design of future policy is important and necessary, it does not provide the concrete information that businesses need to allow them to plan for the future with confidence. There has been a hunger for information from the sector for several years now, and not everyone wants to be involved in the detail of co-designing complex policies. For many land managers it is the final policy outcome that is most important, and that will impact business decisions.

Engagement with land managers and stakeholders has been gradually improving over recent months. When the intention to develop ELM was first announced, engagement was somewhat un-coordinated and it was not always clear which stakeholders were being consulted on which element of the programme. Since then there has been more clarity over the types of engagement Defra is using to achieve co-design of the policy. There has also been a high level of engagement with stakeholders as the launch of the national pilot approaches.

Engagement on the agricultural transition (aside from ELM) has been more problematic. The transition has now begun, with direct payments due to be reduced this year. The recent launch of the Agricultural Transition Plan, and a round of engagement with land managers via talks and webinars is welcome. However, it would have been preferable to have had this level of information and engagement earlier. Defra have described the ATP launch in November 2020 as the first step in a process of engagement and co-design, with multiple opportunities in coming months and years to shape future policy. Again, we feel this approach should have been embedded earlier on, well before the year that the transition starts.

4. How can ELM be made an attractive business choice for farmers and land managers while effectively delivering its policy goals?

The policy goals of ELM are the delivery of (mainly environmental) public goods. Many farmers and land managers already deliver these public goods and so it is essential that ELM reward them for these outcomes or practices.

In addition, a key ambition of ELM is that it will reach out to those businesses that may not previously have engaged with environmental schemes. This would increase the coverage of land that is managed for environmental outcomes, and help deliver the Government’s 25 Year Environment Plan goals.

Achieving high levels of uptake from across the agricultural and land management sector depends on a number of factors. These include:

• ELM payment rates that provide an attractive profit margin for land managers compared to other potential land uses. The payment rate for different actions under ELM will be the ultimate determinant for many businesses as to whether it makes financial sense to enter the scheme. Payment rates must be set at high enough to drive the level of participation needed to deliver the Government’s green objectives
• ELM being attractive to the full range of land management businesses: both those whose aim is to combine profitable production with the delivery of environmental benefits, and those who choose more intensive environmental delivery via taking land out of production or changing land use.
• Including woodland management as well as creation within ELM.I Incentivising woodland creation without support for long-term management is a false economy
• An ELM scheme that is simple to apply for, with rolling application windows, and easy to administer and interact with.
• the availability of advice and support for land managers, before and after entering ELM

5. How can the Government ensure that ELM agreements achieve their intended environmental outcomes, reduce bureaucratic burdens on farmers and deliver value for money?

Flexible, outcome-based approach: The Government needs to ensure that farmers and landowners have control over what and how they deliver the outcomes through a  flexible, outcomes-based approach. This is the best way to harness the experience and innovation that exists within the land management sector. Ideally this should be based on a land management plan for each business, allowing them to choose where and how they can deliver public goods and be paid accordingly. Flexibility should allow for reduced bureaucratic burden, especially if it is accompanied by a fulfillment of the Government’s promise to build a more trusting relationship between land managers and the state. Farmers and land managers should be judged according to their ability to deliver environmental outcomes, not unnecessary prescriptions.

Clear application process and helpline: The Government needs to ensure that farmers and land managers can navigate the application process without the need for an advisor. In the early years, and as the scheme develops, an efficient and free helpline and information hub, similar to the current Farming Advice Service, is essential.

Note, that this should be broadened out to include all Defra schemes in one place, with an individual farm dashboard of applications across ELM and farming productivity schemes, and information on payment dates and inspections.

Advice, guidance and training on environmental outcomes needs investment in the short term: The farmers and land managers should be in control of their applications, but previous experience has demonstrated, the provision of government funded expert advice has a beneficial effect on the uptake, the quality of delivery and the level of ambition. This is particularly important for local nature recovery and landscape scale delivery. In addition, there should be investment in skills and training so that land managers learn how to deliver the best environmental outcomes on their land. This can be delivered through a range of routes including using the National Pilots participants as local demonstration farms. This will require an initial up-front investment in building the capacity of the sector for environmental management.

Payment rates must make financial sense: Payment rates that reflect the multiple benefits and the value to society will be a win for Government and the land managers.

Facilitating collaboration between farmers: There is an important role here for collaboration between farmers, as shown from the experience of the farmer cluster model. Groups of land managers working together can drive higher environmental ambition and performance, reduce costs of delivery, and deliver environmental benefits at a landscape scale.

6. What lessons should be learned from the successes and failures of previous schemes paying for environmental outcomes?

The complexity and administrative burden of the current Countryside Stewardship scheme has caused reputational damage and discouraged participation. Improvements have been made in recent years but the most important lesson is to get it right the first time, to avoid more wasted years, which neither the environment nor land managers can realistically bear.

Compared to previous schemes, Countryside Stewardship is overly complex, with a high administrative burden. The long manual discouraged farmers, as did the daunting application process. ELM must ensure a simple application process and clear guidance. Farmers and land managers need to be clear from the outset about what they are expected to deliver and how entering into ELM will fit within their existing business. There should also be a rolling application window for the scheme, so that people can enter the scheme at the time most appropriate to them and their businesses, without the pressure of a single point in the year to apply.

The current inspection and enforcement regime for Countryside and Environmental Stewardship is not fit for purpose because it is neither risk-based nor proportionate. The ability of government or agency field officers to evaluate delivery is an important element and should be based on a good understanding of both the farm business and the scheme. While it may be easier to train inspectors to work through a carefully pre-determined list of prescriptions, this does not result in the best outcomes and fails to allow flexibility. A better approach would be for those with an understanding of the outcomes being aimed at to help determine whether the delivery is contributing towards these outcomes. If there are short-falls these can then be dealt with swiftly, through advice on how to improve.

Despite these problems, the underlying content of the Countryside Stewardship scheme is largely sound and represents a good range of environmental management options based on evidence of what works.

January 2021

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