Agricultural Transition Period: Agricultural funding is changing

Agricultural funding in the UK is experiencing its biggest changes in a generation.

Following the UK leaving the EU, we have now entered into what the Agriculture Act 2020 (AA 2020) calls the "agricultural transition period for England". This is set to run to the end of 2027, by which time the UK will have moved from the Common Agricultural Policy of the EU to a new agricultural policy in the UK.  This article considers changes to funding in England.

Key Points

  • BPS is being phased out and will end in 2027. As part of this process, payments will be delinked from land from 2024.

  • Agricultural funding is moving away from a payment per hectare basis to payment for environmental public goods (i.e. helping the government make its net zero targets).

Phasing out of the Basic Payment Scheme (BPS)

  • The government began phasing out direct payments in 2021, and they will be phased out completely by 2027. 
  • There will be no payment entitlements given to new and young farmers in relation to land bought or leased after 17 May 2021.
  • 2023 is the last year BPS will be paid. From 2024 to 2027 BPS payments will be replaced with delinked payments in England. These payments will be delinked from land, and there will be no obligation for the recipient of the payments, during the transition period, to remain a farmer.

Phasing In the New Financial Assistance Schemes

The government is moving away from the Common Agricultural Policy the UK adopted as a member of the EU towards a policy which focuses on the concept of "public money for public goods". This is what most people know as Environmental Land Management Schemes (ELM).

The new financial assistance powers are linked to a list of specified purposes that broadly encompass:

  • Improvements to the environment;
  • Public access to land;
  • Animal welfare;
  • Starting or improving productivity of an agricultural, horticultural or forestry activity; and
  • Supporting ancillary producer activities.

The new financial assistance scheme means a shift from most farm support funds paying farmers for how much land they farm, to paying for "public goods" such as environmental improvements.

ELM will comprise 3 schemes:

  1. Sustainable Farming Incentive (SFI)

SFI pays farmers to manage their land in an environmentally sustainable way, with SFI agreements lasting for 3 years. The scheme is made of a set of standards. Each standard is based on an asset and contains a group of actions, which have to be met for a farmer to receive the payment. The government initially offered standards 1 to 3 below, and in 2023 has added standards 4 to 9.

  1. Arable and Horticultural Soils standard
  2. Improved Grassland Soils standard
  3. Moorland and Rough Grazing standard (introductory level)
  4. Hedgerows standard.
  5. Integrated pest management standard
  6. Nutrient management standard
  7. Arable and horticultural land standard
  8. Improved grassland standard
  9. Low input grassland standard

The SFI standards have been designed to be flexible, so farmers are able to choose the combination of actions which work for their farm. Where a farmer is already in SFI agreement(s), they may add the new actions and additional land if they so wish.

Holders of an SFI agreement will also need to have "management control" of the land for the duration of their 3-year agreement. This "management control" means the applicant has sufficient control over how the land is managed to complete the actions in the standards chosen. A positive point for tenant farmers is that landlord consent is not required for tenant farmers to take part. Payments are made to the person carrying out the relevant action. Further, it is possible to leave the scheme early, with no penalty, if a scheme participant unexpectedly loses management control of the land entered into the scheme.

BPS will continue to run alongside SFI until it is delinked in 2024. Rather usefully, the same land parcel can be included in a BPS application and SFI standards agreement, as long as it is eligible for each scheme.

The government has also recently introduced an SFI management payment to recognise the management costs and time involved for farmers in participating in SFI. This will be a payment of £20 per hectare per year, for up to the first 50 hectares entered into SFI actions (maximum payment of £1,000 per year).  

  1. Extended Countryside Stewardship Scheme

As many will be aware, the current countryside stewardship scheme (CS) rewards farmers for environmental work carried out alongside sustainable food production, including restoring wildlife habitats, creating or managing woodlands, or mitigating flood risks. In contrast to SFI, the CS provides payments for more targeted actions relating to specific locations, features and habitats.

The government has broadened the scope of the existing scheme in a number of ways including expanding the capital offer to include specific items to help farmers and land managers prepare for habitat creation and restoration, allowing Higher Level Stewardship agreement holders to take up CS agreements and replacing the currently burdensome revenue claim process with an annual declaration.

The CS scheme is also being evolved through to the end of 2024 to include what was originally intended for the Local Nature Recovery ELM. This Countryside Stewardship Plus Scheme (CSP) will reward farmers for taking coordinated action, working with neighbouring farms and landowners to support climate and nature aims. The evolution is intended to make around 30 additional actions available to farmers by the end of 2024.

Farmers that have an existing CS agreement made under EU regulations which is due to expire can apply for a new CS agreement under the domestic terms and conditions.  These mirror agreements are new agreements made under domestic regulations that will mirror an existing CS agreement that is due to expire on 31 December 2023.

As the schemes evolve through to the end of 2024, the government intends to offer SFI and CS in a single integrated online service, with farmers and land managers able to select a combination of actions in SFI and CS which work for them.

  1. Landscape Recovery

The Landscape Recovery scheme is intended to fund a smaller number of longer-term, larger scale, bespoke projects to enhance the natural environment and deliver significant benefits, such as:

  • Restoring wilder landscapes in places where it is appropriate
  • Large-scale tree planting
  • Peatland and salt marsh restoration

The majority of projects funded to date involve groups of land managers and farmers, including tenants, working together to deliver a range of environmental benefits across farmland and rural landscapes.

Funding under this scheme is allocated on the basis of competitive application rounds focused on the outcomes that are best placed to produce environmental outcomes. The government intends to open funding for further rounds of Landscape Recovery for up to 25 projects in spring 2023 and 2024.

Our podcast

Changes to agricultural funding has been a recent topic of discussion in our Experts in the Field podcast, where Edward Venmore and Kate Lucas are joined by Stewart Horne, Director and Agricultural advisor at Business Information Point. Please see below.

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