We are pleased to publish this discussion of recent developments in UK (England’s) post-Brexit agricultural policy by Professor Ian Hodge of the Department of Land Economy, University of Cambridge, UK. The comments here represent solely the views of the author and not of any UK government department.
Following Brexit, the UK has been developing its own approach to agricultural policy. Agriculture is a devolved matter and so the individual nations are introducing separate policies. In England, under the 2020 Agriculture Act, direct payments are being phased out over a seven year transition period and replaced by Environmental Land Management Schemes (ELMs) under the slogan of ‘public money for public goods’. The policy includes three schemes as indicated in Box 1: Sustainable Farming Incentive (SFI), Countryside Stewardship (CS) and Landscape Recovery (LR).
Three Environmental Land Management schemes
Sustainable Farming Incentive (SFI) will pay farmers to adopt and maintain sustainable farming practices that can protect and enhance the natural environment alongside food production, and also support farm productivity (including by improving animal health and welfare, optimising the use of inputs and making better use of natural resources).
Countryside Stewardship (CS) will pay for more targeted actions relating to specific locations, features and habitats. There will be an extra incentive through CS Plus for land managers to join up across local areas to deliver bigger and better results.
Landscape Recovery (LR) will pay for bespoke, longer-term, larger scale projects to enhance the natural environment.
The approach has been developed through a process of co-design (as discussed by Ruth Little et al. 2023. The co-design of post-Brexit agri-environmental policy) focussing on environmental land management in England and a series of tests and trials. It continues to be under development and the current position with regard to SFI and CS is set out in a recent policy paper ‘Environmental Land Management (ELM) update: how government will pay for land-based environment and climate goods and services’. The comments here focus primarily on these two schemes. SFI is a new scheme offering a broad range of easily adoptable options intended to be taken up across a majority of farms. CS is a continuation and development from the previous CS scheme initially introduced in 2015.
The third and most innovative ELM scheme, Landscape Recovery, aims to promote long-term, significant habitat restoration and land use change. It will be open to any individuals or groups who want to come together to deliver large (500 – 5000 ha) projects and implementation will be long term, e.g. 20 years or more, with long-term safeguards, such as by conservation covenants (introduced under the 2021 Environment Act). Projects will not be fully funded by government, rather combining private and public funding. It will thus complement markets for ecosystem services, such as carbon sequestration or improved water quality. Government will negotiate bespoke agreements so as to deliver good value for money, delivering significant outcomes and attracting private finance. Twenty two initial pilot projects were announced in September 2022.
The approach towards ELM is based on four principles as set out in Box 2.
ELM Payment principles
Principle 1 – payment rates to encourage wide participation, whilst fairly and effectively paying farmers for achieving environmental and climate outcomes.
Principle 2 – payments that, as far as possible, recognise and pay for outcomes that can be delivered through a wide range of activities.
Principle 3 – payments which recognise the value of existing natural assets and don’t unfairly disadvantage those who are already protecting and enhancing these assets to achieve good environmental and climate outcomes.
Principle 4 – payments that form part of a growing market for environmental outcomes, where scheme participants can earn income from public and private sector sources
Payments under SFI and CS will initially be based on income foregone plus costs but it is anticipated that more innovative ‘market-based’ mechanisms will be introduced in the future, including competitive price discovery approaches such as reverse auctions. The key aspects of the principles are the focus on paying for ‘outcomes’, rather than actions; the aim for flexibility in attracting large numbers of farmers to participate in the schemes; and the willingness to make payments, whether or not the outcomes have been caused by the payments. The intention of encouraging private finance is signalled. But perhaps most notable is that while there are several references to ‘value for money’ in the text of the policy paper, it is nowhere explicit in the principles.
The general approach to ELM
The approach to the introduction of SFI and CS is cautious and incremental. Following from the ‘principles’ there are tensions amongst the objectives to be addressed. The thrust is generally towards a ‘more outcome focussed, less prescriptive and more flexible’ approach, while at the same time seeking ‘value for money’. There is, however, little innovation to date in terms of policy mechanisms: no adoption of reverse auctions, collective contracts, agglomeration bonuses or payment by results. There are further options and improved versions yet to be added and more innovation is anticipated with the introduction of ‘CS Plus’, a planned further development of CS.
The design so far might be seen as ‘farmer friendly’. The approach is claimed to be a simplification on previous agri-environment schemes. It is argued that payments ‘can help farmers … reduce costs whilst also potentially maintaining or improving yields’ or ‘enable farmers to generate an income from unproductive corners and edges of fields …’. Farmers will additionally receive a payment of £20 per ha for up to 50 ha, in addition to the payment for the actions required, ‘to cover the costs of taking part in SFI’.
There is flexibility in the actions that are allowed in order to meet the requirements of various options; this could potentially present challenges to effective enforcement. Interestingly, the Minister has stated that ‘There are no penalties in SFI’. But of course, farmers themselves will take a different view as to whether or not the arrangements for ELM are ‘friendly’ when seen in the wider context in which they are losing their direct payments. It is stated that budgets will be adjusted ‘according to the levels of demand’. Whether this refers to ‘demand’ from farmers for particular types of funding or from the public for the different outcomes of the policy will become clearer as the policy develops.
This begs the question as to how the policy should be evaluated at this stage. What is the counterfactual against which it should be assessed? It might be argued, at least in the short term, that because ELM is replacing the previous system of direct payments under the Common Agricultural Policy, it should be assessed in terms of its capacity to support farmers through the transition and to use funds more effectively than direct payments, as much as in its capacity to deliver cost-effective environmental improvements. Many farm businesses are substantially dependent on their direct payments and will find it harder to survive without them than is perhaps implied in the government’s assertion (Executive Summary, p. 4) that ‘most farm businesses will be able to make modest cost reductions in order to improve efficiency, which will be required when Direct Payments come to an end’. Alternatively ELM might be assessed purely against conventional economic efficiency criteria as set out by the Treasury in the ‘Green Book’.
SFI repeats the challenges of Entry Level Stewardship
SFI was launched in 2022 and offers arable and horticultural soil standards, an improved grassland standard and a moorland standard. Further standards being offered in 2023 include hedgerows, integrated pest management and nutrient management. A full set of standards is due to be in place by the start of 2025.
The SFI is, in many respects, similar in approach to the Entry Level Stewardship Scheme (ELS), part of Environmental Stewardship, which closed to new entries in 2013. ELS attracted large numbers of farmers who were paid £30 per ha per annum for adopting sufficient environmental management options from a wide range offered under the scheme. The outcome was that most farmers chose options that were simple to adopt but that often delivered little environmental benefit.
Similarly, some options under SFI require very little additionality. For instance, in a couple of cases, such as for the Integrated Pest Management plan or nutrient management review, payments can be claimed even where work had already been undertaken in the previous 12 months. The hedgerow management standard sets a maximum number of cuts (e.g. no more than once every three years) rather than a minimum, implying that doing nothing can be acceptable.
It may thus be anticipated that the wide range and basic nature of many options available under SFI will, similarly to ELS, limit the potential environmental benefits that will be achieved. Further, the Good Agricultural and Environment Condition cross-compliance requirements that were applied under the Common Agricultural Policy don’t apply with the SFI while they did under ELS. In fact under ELS there was a further requirement to avoid under-utilisation and overgrazing on the whole farmed area. There is no spatial targeting in the SFI and payment rates are the same across the country.
Clearly SFI could in principle be developed to deliver higher and better targeted environmental benefits (as discussed by Hodge and Read (2010) in connection with ELS), such as by varying payment rates depending on where and what types of options generate the greatest social value. Competition might be introduced along the lines of the US Conservation Reserve Program. There is clearly scope for further development in the future although there is no indication of what form this might take.
CS develops from the current scheme
The initial ELM plan was to establish a new Local Nature Recovery Scheme to focus on locally targeted actions to promote nature alongside food production. This element of ELM will now take the form of a ‘simplified and improved’ version of CS that was initially introduced in 2015. A range of options has been added and there are now many available; the Countryside Stewardship Grant Finder lists a total of 259 options, capital payments or supplements. Defra states that simpler and easier ways to join CS have been added and agreement holders will be able to add land and actions each year. Actions are being made ‘more outcome focused, less prescriptive and more flexible about how to achieve the intended outcomes’. Whether this raises issues for future enforcement will be seen in due course.
Meeting wider environmental objectives
The government is committed under the Environment Act 2021 and elsewhere to meet various legally binding environmental targets. These include to halt the decline in species abundance by 2030, to protect 30% of the land area by 2030, to create more than 500,000 ha of wildlife-rich habitat by 2042, and to have actions on track to bring 50% of sites of special scientific interest to achieve favourable condition by 2028. Past agri-environment schemes have generally failed to achieve similar wider countryside targets, even though more than 70% of farmland had been enrolled in Environmental Stewardship in 2014. This raises a variety of questions. Will more of the same approaches to agri-environment policy have sufficient impact in order to achieve the targets set? Can land under relatively short-term agri-environment contracts be defined as ‘protected’ or meet the ecological requirements to be deemed to be ‘wildlife-rich’?
Changes in farming will clearly be a significant component of the UK commitment to achieve Net Zero. At present ELM includes incentives for woodland creation and management, and for peatland restoration. The government has signalled an objective to attract private finance in support of Nature based Solutions. However, it is not clear how these ELM options will be prevented from crowding out private finance. It could be possible to offer matched funding to crowd in private funding for these actions.
Other ELM options may have some indirect benefits for climate change, such as in increased levels of carbon in agricultural soils, management of farm wastes to reduce water pollution or in reduced stocking densities on herb rich pastures. But there are no options targeted directly at the reduction of greenhouse gas emissions from livestock production. Given the large number of possible actions involved, it could be possible to use ELM to incentivise different approaches, to monitor and evaluate the outcomes and then adaptively improve the cost effectiveness of climate policy.
In recent years there has been an increasing appreciation of the importance of public access to the natural environment as a way to improve public health and welfare. And this has been emphasised particularly through the Covid pandemic. Further, the maintenance of public funding for ELM will rely on popular support and providing public access to the countryside would seem to be a key element in demonstrating the outcomes of the investments in ELM widely to the public. However, at present ELM only provides funding in support of access into woodlands. While government is exploring the potential for public access under ELM, this would seem to be a core element of land use policy that is currently missing under ELM.
Representing local public demand for public goods
As it stands the design and implementation of ELM is undertaken by central government agencies. There is little if any scope to represent the priorities for actions held by local communities. Under the Environment Act 2021, local areas will be required to produce Local Nature Recovery Strategies (LNRS) that will set out priorities for nature recovery. However, there is no direct link to ELM or other dedicated source of funding whereby these strategies can to be translated into incentives for land managers to implement the desired actions. One approach to this would be to devolve responsibility and provide funding to Local Environmental Governance Organisations (as recommended in Hodge, 2019) that can oversee the creation of LNRSs and then allocate funds to incentivise their implementation.
Securing the benefits in the longer term
The effective achievement of the desired outcomes for the rural environment is increasingly dependent on long-term commitments to land uses and management practices. This is clearly the case for investments in carbon sequestration through woodland planting or peatland restoration where there is a minimum project period of 30 years. But it also applies for Nature based Solution schemes more generally, such as to mitigate flood risk or to rewild areas of land. Similarly, a longer-term approach is required in order to meet the government’s targets for biodiversity. This requirement contrasts starkly with the much shorter contracts offered under ELM; the contracts under SFI only run for three years. The longer-term thinking is likely to depend on additional approaches to secure land management practices such as conservation land ownership or conservation covenants, which were also introduced under the Environment Act 2021.
The design of ELM is still underway and is intended to evolve through the period of the agricultural transition. However, Defra has offered no coherent vision as to its longer-term goals for rural land and environment, beyond the series of separate environmental targets. And achievement of these targets, bringing in private finance and doing more to represent local priorities, will require more innovative mechanisms, better targeting and a high level of take up by farmers. It will be critical to get the right balance between SFI, CS and LR and this is unlikely to be the balance that is preferred by farmers. Simply repeating the approach of previous agri-environment schemes will not be sufficient.
The government needs to guard against land management systems and practices and policy expectations becoming locked-in before the policy offer reaches its intended end state. There are, at present, considerable pressures on land managers to adapt to the shifting conditions and to adopt new approaches. But over time their systems will become more established and managers are likely to become less amenable to further change. That will present greater challenges to the implementation of more radical approaches to ELM.
ELM sits within an increasingly demanding and complex policy environment. Rural land is being expected to deliver biodiversity recovery, carbon sequestration, flood mitigation, better water quality, water storage and public access all alongside a greater public demand for domestic food security. Private organisations are looking to land use to offset their climate impacts, to secure their supply chains or to protect their infrastructure. There is at the same time a whole series of new public policy mechanisms in addition to ELM: a national land use framework, a National Nature Recovery Network, Local Nature Partnerships, Local Nature Recovery Strategies, Biodiversity Net Gain and conservation covenants.
At this stage it is not clear how these elements can be brought together most effectively. It will almost certainly require a greater level of decentralisation of decision making than is currently anticipated by government, perhaps through the establishment of a series of Local Environmental Governance Organisations. But ELM needs to play its role in incentivising the actions of managers on the ground to respond to these opportunities, pressures and demands. There is much more to do to achieve this.
This post was written by Ian Hodge.