EFRA Committee report on Environmental Land Management and the agricultural transition

The Environment, Food and Rural Affairs Committee has published its report on Environmental Land Management and the agricultural transition. 

Conclusions and recommendations

The agricultural transition

1. The scale of environmental, social and economic change facing English farming cannot be understated. This includes the global challenge of climate change and the need to operate in new trading conditions, but it also includes the Government’s decision to fundamentally change the basis of agricultural policy. The agricultural transition must work for farmers and make a significant contribution to achieving the Government’s environmental objectives. (Paragraph 14)

2. Considerable uncertainty remains about how the 7-year agricultural transition will affect English farming. As direct payments are withdrawn, there is a risk that farmers will resort to less environmentally sustainable methods to make up for lost income, leave the sector or go out of business entirely. We are concerned that Defra has not published a comprehensive assessment of the impacts of its policy, and the Secretary of State himself acknowledged to us that we know who will lose money but not how many will take up the new schemes. The Secretary of State also told us that land rents “might” adjust downwards, but has not adequately demonstrated this. The Department needs to make a detailed and comprehensive assessment of the economic and environmental impacts of removing direct payments. Defra should publish an impact assessment, covering plausible scenarios, detailing how the transition from direct payments to ELM will impact the viability of farm businesses, broken down by sector and by region. Defra should also detail the anticipated environmental impacts if the delivery and uptake of ELM falls short of its ambitions, for instance, if farmers decide that it makes more financial sense to intensify production than to enter into ELM. (Paragraph 21)

3. Defra has put insufficient emphasis and care into managing the process of transition itself, and there is a risk that this will be a haphazard process leading to unintended consequences. Ministers’ absolute determination to press ahead with the timescale for phasing out direct payments and introducing ELM, even when confronted with significant disruption across Government and the economy, also suggests an unwillingness to adapt to unforeseen circumstances. We would expect that this contingency planning should already be taking place, and we note that Defra officials have previously asked for a delay to the pilot due to delivery concerns. After years of delay and uncertainty, time is now short, and Defra must do more to give us confidence that it will take account of changing circumstances as the agricultural transition proceeds. Defra should commit to regularly reviewing its plan for the agricultural transition and to developing contingency plans, including plans to provide for greater flexibility in the phasing out of direct payments. These reviews should draw on a comprehensive assessment of the impact of Defra’s policies. Defra should implement its contingency plans if it becomes necessary to ensure continued farm viability. (Paragraph 30)

4. The Committee commends Defra’s commitment to co-designing the agricultural transition, and appreciates the challenges involved. However, there appears to be a disconnect in the co-design process between listening to stakeholders and being seen to act on this feedback. The benefits of effective co-design should include helping to build trust and confidence between farmers and the Government, so this failure of communication represents a significant missed opportunity. (Paragraph 39)

5. We are pleased that Defra’s engagement has improved over the last year, but delays in communication due to delays in policy development have already impacted farmers’ ability to plan for the significant changes ahead. Defra itself cannot directly reach every farmer, but it is essential that every farmer and land manager is made aware of what is coming. The scale and complexity of Defra’s policy means that a clear strategy to communicate its plans to the full range of farmers and land managers, with measurable objectives, is needed. If this is not in place, the agricultural transition risks falling at the first hurdle. Defra should develop a clear engagement strategy with plans in place to measure its success in reaching the full range of farmers and land managers, and consider how advisory networks and intermediary organisations may be more effectively used to communicate key information about the agricultural transition. In order to build confidence and foster buy-in, this engagement strategy should also involve a concerted effort to demonstrate how the views of farmers and land managers have fed into the design of ELM. (Paragraph 40)

Environmental Land Management

6. We are concerned that Defra is already in the process of delivering its multi-billion pound ELM programme, representing the biggest change to farming policy in decades and a central delivery mechanism for the Government’s environmental goals, without having published any measurable objectives. We understand that the process of developing objectives is underway, but we are already nearly a year into the agricultural transition and Defra has not explained in detail how it will show that the money being taken away from farm payments is being spent effectively. This should happen as soon as possible, and definitely before the Sustainable Farming Incentive opens for applications in 2022, representing the start of the ELM schemes proper. Before the SFI application window opens in 2022, Defra should publish precise, measurable objectives for ELM and explain how it intends to track progress towards achieving these goals. Defra should provide detail on how these objectives will contribute to the Government’s wider environmental ambitions, and will be integrated with other policies and delivery mechanisms including Local Nature Recovery Strategies. It should also set out the role Natural England will play in evaluating schemes and ensuring that they are joined up with other policies. (Paragraph 46)

7. The Government has been clear that the success of ELM is critical to meeting its environmental ambitions, but this will require huge uptake of the scheme and the funding to ensure that. If farmers are to enter into multi-year agreements to deliver public goods, they deserve a clear guarantee that the Government is committed to the sustained, long-term funding of this transition. Defra should commit, as a minimum, to retaining the current agriculture budget until at least 2029 as recommended in the independent National Food Strategy. (Paragraph 50)

8. A substantial proportion of farmed land in England is tenanted, and common land accounts for a significant percentage of land delivering important public goods such as biodiversity and public access. It is important that the particular needs of tenants and commoners are properly accounted for in the scheme’s design, rather than forcing them into a scheme designed for owner-occupiers. Defra also needs to ensure that Farm Business Tenancies, which tend to be short-term, are compatible with entering into ELM agreements. (Paragraph 59)

9. Upland livestock farmers have often been among the most dependent on direct payments, but there is also evidence that existing agri-environment schemes have reduced income stability for upland livestock farmers in less favoured areas. Those farming the uplands, and tenanted and common land, will face particular challenges during the agricultural transition, and Defra must not squander the considerable potential of this land to deliver public goods. Defra should explain in its response to this Report how the needs of those farming uplands, commons and tenanted land, who risk being disadvantaged during the transition, will be reflected in its ELM schemes. It should also explain how it will ensure the environmental and societal benefits of upland and common land pasture are recognised in ELM. (Paragraph 60)

10. It is important that ELM supports the delivery of a full range of public goods. Biodiversity and net zero are crucial objectives, but Defra should not lose sight of the invaluable role that farmers and land managers can also play in supporting public access to the countryside, and maintaining heritage assets for current and future generations. We look forward to more detail on how ELM will contribute to this. Defra should explain in its response to this Report how it will ensure that public access and heritage are recognised in the SMART objectives for ELM, and that the delivery of these public goods receives adequate funding. (Paragraph 62)

The Sustainable Farming Incentive

11. It is important that the Sustainable Farming Incentive does not repeat the failures of previous agri-environment schemes like Entry Level Stewardship, which achieved high uptake but failed to drive significant environmental delivery. It must also not create perverse incentives or fail to reward existing good practice. The SFI should form part of a process, supporting farmers to deliver more and more for the environment over time. Defra should set out in its response to this Report how the Sustainable Farming Incentive will reward existing good practice at the same time as encouraging farmers to undertake new environmental activities. It should also explain how the SFI will support improved environmental delivery over time. (Paragraph 69)

12. A degree of simplicity may be necessary in order to achieve high SFI uptake, and we acknowledge that an approach based on specific actions and parcels of land will work for many farmers. However, Defra should not miss opportunities to also support a more ambitious whole-farm approach to delivering public goods. This could also help farmers produce food both more sustainably and more competitively, by making the best use of their land and reducing costs. Alongside the parcel-based actions within the SFI, Defra should set out a plan to support public goods delivery at the whole-farm level, including using the pilot phase of SFI to evaluate the merits of including a whole-farm standard in the scheme. (Paragraph 73)

13. We share the concerns of many that the existing approach to calculating payments based on “income foregone” will be unattractive to farmers and ineffective for the environment. Payments for environmental actions need to fairly and fully represent the management costs associated with delivering them. It is also true that agrienvironment delivery has in the past been underpinned by BPS payments, and Defra must ensure that payments for new schemes are high enough to account for the loss of this money. (Paragraph 79)

14. We acknowledge that Defra has announced higher payment rates for the SFI in 2022, but farmers still lack the full details on payment rates across ELM that would enable them to start planning now. We also welcome Defra publishing new information on its payment principles, but the Department itself has acknowledged that it will not always be possible to apply these. Defra must get the payment rates for ELM right if it is to secure the levels of uptake needed to achieve its environmental ambitions. Defra should explain in its response to this Report how it will set payment rates for the full SFI in 2024, and the other ELM components, to ensure that participating in these schemes is an attractive option for farmers as BPS is withdrawn. This should include assessing levels of participation in SFI 2022, and whether this suggests that higher payment rates will be needed in future to ensure the necessary uptake. (Paragraph 80) Advice and regulation

15. High quality advice, which is appropriate to the individual farm and takes into account the specific local conditions, is essential if farmers are to be productive and deliver environmental benefits. We acknowledge Defra’s intention that the Sustainable Farming Incentive should not require expert advice, but this should not mean that opportunities are missed to help farmers go further through effective facilitation. In particular, peer-to-peer learning should form an important element of the agricultural transition. Seeing others turn to more sustainable practices, and succeed, will play a valuable role in giving many farmers the confidence to engage with ELM. Defra should fund and facilitate knowledge exchange and peer-to-peer learning among farmers to drive scheme uptake and effective delivery of public goods. Defra should also ensure that farmers and land managers have access to effective local facilitators, who can help them improve their delivery. (Paragraph 87)

16. Evidence suggests that some farmers currently do not pay for environmental advice because it is not deemed commercially relevant to them. As the focus of farm payments moves to public goods, it is important that these farmers are supported to access the advice that they will need to ensure they are not left behind. Defra should explain in its response to this Report how it will ensure that a reluctance to pay for advice does not inhibit the uptake of ELM and the delivery of public goods. (Paragraph 88)

17. ELM must be accessible and avoid the bureaucratic barriers to entry and punitive regulations which plagued previous agri-environment schemes. We welcome Defra’s commitment to improving their approach to regulation and enforcement, but emphasise the importance of delivering on these promises to build confidence and promote the uptake of ELM, lifting the burden on those who follow the rules while ensuring that public money is being well spent on delivering meaningful outcomes. Defra should provide more detail in its response to this Report on how it intends to use of a range of mechanisms, including a risk-based approach and where appropriate assurance schemes and self-assessment, to ensure that farmers in ELM agreements are delivering for the environment while not being subject to unnecessarily burdensome and bureaucratic regulation. (Paragraph 93)

18. Past experience has shown the potential for failures in digital delivery to do real damage to farmers’ trust in Government. We recognise that Defra has decided to initially use a simplified version of existing systems rather than attempting to build something from scratch. However, the Government’s plans for ELM are far more ambitious than previous schemes, and concerns have previously been raised that it will find itself playing catch-up if it realises too late that its systems are not suitable. This must not be allowed to happen. Defra should explain in its response its approach to ensuring that it will have suitable and scalable IT systems in place to deliver the full ELM scheme from 2024. (Paragraph 96)

19. We note that we are nearing the end of the first year of a seven-year agricultural transition, and Defra does not yet appear to have made key decisions about which bodies will be responsible for delivering the biggest change to farm support in decades. It is only fair to farmers, and to the agencies themselves, that Defra provide fair notice of what it will be asking of its arms-length bodies in the very near future. Defra should explain in its response to this Report at what time it will clearly communicate a final decision about which bodies will have operational responsibility for the ELM schemes. (Paragraph 99)

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