Category: Policy & Business

The second part of the National Food Strategy report, undertaken by Henry Dimbleby, has recently been released.  A tax on sugar and salt made headline news but some of the other recommendations have a more direct impact on UK farming.  In total, there are 14 recommendations; 8 and 9 (looked at in more detail below) are likely to impact the most on farmers, but other recommendations including Innovations to Create Better Food Systems (recommendation 11) and Maintaining Standards for Trade (recommendation 10) will also be of interest.

The report is independent and the Government does not have to implement its recommendations.  Indeed, the Prime Minister has already rejected the idea of taxing sugar and salt.  The Government has said it will respond to the report with a Food White Paper within six months.  The recommendations in full can be found at https://www.nationalfoodstrategy.org/the-report/

Recommendation 8 – Guarantee the Budget for Agricultural Payments until at Least 2029

It is recommended that the current budget of £2.4bn is maintained, in real terms, to 2029.  Currently the Government has guaranteed that spending will remain the same for agriculture until the end of this Parliament (scheduled to be 2024).  The report recommends, at the least, this overall spending commitment is maintained to the end of the decade, progressively shifting about £2.2bn from BPS direct payments to ELM.  The remaining £200m should be used to improve farm productivity and innovation.

A further proposal is to ring-fence £500-£700m of the budget for schemes which encourage natural carbon removal and habitat restoration.  The idea being these schemes would incentivise farmers to convert their less productive land into nature-rich, carbon-sequestering landscapes.  This would see farmers receive payments on a basis of ‘carbon sequestered and nature restored’.  Initial payment rates should be 100% of costs with an additional per hectare payment uplift to ensure farmers receive a fair return on land taken out of production.

The report maintains changing the way agricultural land is used is key to achieving national targets; protecting 30% of land in England for nature by 2030 (30×30), the 25 year plan for nature and the net zero target and carbon budgets.  The report estimated in line with the Climate Change Committee’s (CCC) 6th Carbon budget report, that ‘roughly one tenth of agricultural land in England will need to transition to woodland, restored peat, other semi-natural habitats and energy crops by 2035 as part of the broader road to net zero’.

The strategy states ‘we think that Defra is broadly speaking, taking the right approach’ by transitioning from BPS to ELM, but notes that farmers have received subsidies based primarily on the amount of land they farm or the amount of food they produce for over seventy years and they ‘need time – and money – to adjust their business models’.  It acknowledges the reliance many farms have on Basic Payments, but it also draws attention to the fact that the difference in profit between farms is not just as a result of effort and skill by individual farmers, but much of it is to do with the quality of the land.  The report recommends that this unproductive land can now be turned into an advantage for both the ‘farmer and the common good’.  It states that around 20% of English farmland would be suited to creating environmentally friendly landscapes, such as species-rich wood pasture grazed by rare breed cows, new diverse forests and re-wetted peat bogs.  Although most would be upland farms, some lowland grazing land would also fall into this category.  Mr Dimbleby cites losing 20% of the least productive farmland would present very little risk to food security (just 3% of calories).  But until there is a market for carbon sequestration or natural capital restoration, the report recommends £500-£700m per annum, about one third of the ELM budget should be used to pay farms for establishing; 4000,000 hectares of species-rich broadleaf forests, 325,000 hectares of restored upland peat and about 200,000 hectares of farmland dedicated to nature.

Recommendation 9 – Create a Rural Land Use Framework based on the Three Compartment Model

The recommendation is that a Rural Land Use Framework should be devised by Defra ready for 2022.  This will provide a detailed assessment on which land should be used for what, so that food security is not compromised and the environment not made worse.  The report notes that, in the main, the land that could deliver the greatest environmental benefits is often the least productive.  The only real ‘clash’ in England is the Fens, where the land is exceptionally productive, mainly due to its peaty soils, which would otherwise be a major carbon sink.  The report recommends the framework should set out the best way to achieve a ‘Three Compartment Model’ for the country, including which land is more appropriate for;

• Semi-natural land
• Low-yield farmland
• High-yield farmland

It should also flag up land that is appropriate for economic development and housing and should be updated annually.  The aim is for it to provide detailed assessments of the best way to use any given area of land and inform the many existing incentive schemes and future policy within Defra.

Other Recommendations

The remaining recommendations are important in the overall drive in making everyday foods more healthier and tackling the nation’s obesity problems but have less of a direct impact on farming.  The one making the headline news is the introduction of a sugar and salt reformulation tax – £3 per kg on sugar and £6 per kg on salt sold for use in processed foods or in restaurants and catering businesses.  Some of the revenue to used to get fresh fruit and veg to low income household (Recommendation 1).  Others include;

• making it a legal duty for all food businesses with over 250 employees to publish annual data on their sales of various product types as well as food waste
• the Department for Education should launch a new ‘Eat and Learn’ initiative for all 3-18 year olds
• there are initiatives for households on low incomes including increasing the eligibility threshold for free school meals (FSM) from £7,400 to £20,000, extending the Holiday Activities Food programme open to those receiving FSM for the next three years, expanding the Healthy Start scheme and trialing a ‘Community Eatwell’ programme to improve the diets of those on low incomes
• creating a National Food System Data programme to collect and share data
• the Government should reform its Buying Standards for food so that taxpayers’ money goes on healthy sustainable food and it should also set a long-term statutory target to improve diet-related health and create a new governance structure for food policy, through a Good Food Bill.

Defra’s ‘flagship’ statistical publication ‘Agriculture in the UK’ has been published.  The latest edition includes a wide range of farming and food statistics up to the 2020 year.  It can be found at – https://www.gov.uk/government/statistics/agriculture-in-the-united-kingdom-2020 .

An industry group has been granted funding to develop a Farm Soil Carbon Code.  This would be similar to the existing Woodland and Peatland Codes, providing a set of formal protocols that would allow farmers to quantify and verify reduced greenhouse gas emissions and/or soil carbon capture as a result of adopting regenerative farming practices.  The lack of a formal standard is one of the issues holding back the development of a market in carbon offsetting in farming.  The consortium includes farmers, academics, technology businesses and NGOs led by Farming and Wildlife Advisory Group South-West (FWAG).  For more details see https://sustainablesoils.org/soil-carbon-code/about-the-code).  The grant has been awarded under the Environment Agency’s Investment Readiness Fund.

New figures have been released on the UK’s ‘carbon footprint’.  This measures Greenhouse Gas (GHG) emissions associated with UK consumption and is a much better gauge of society’s contribution to climate change than the ‘headline’ UK GHG production figures.  This is because we import many of the goods consumed, and therefore the production emissions are counted in other countries’ figures.  It is acknowledged that it is more difficult to account for the emissions ’embedded’ in imports and so these ‘carbon footprint’ figures are classed as experimental.  The headline figure is that the UK’s carbon footprint has declined by 37% between 1997 and 2018.  The full statistics can be found at – https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/979588/Defra_UK_carbon_footprint_accessible_rev2_final.pdf

A new Welsh Agriculture Bill is to be laid before the Sennedd this autumn.  This will contain the powers to enact the new Sustainable Farming Scheme (SFS).  In announcing the legislation, the Welsh Government has suggested the new support scheme should start in 2024 (although this is not 100% certain).  The Bill is unlikely to give details of how the SFS will work in practice – this is still being worked on.  Instead it will set the legal framework under which the scheme will operate.

 

The Sustainable Farming Incentive (SFI) Pilot application window is open for those who expressed an interest in the scheme earlier in the year.  All the information to make an application can be found at https://www.gov.uk/government/publications/how-to-apply-for-the-sustainable-farming-incentive-pilot/how-to-apply-for-the-sustainable-farming-incentive-pilot.  Applications are made via the Rural Payments online system.  Those who have made a BPS or CS application should find the process and systems familiar.

Note, however, that Defra has made some amendments to the Pilot announced earlier in the year.  In particular, the two Soils Standards – Arable and Horticultural Soils Standard and the Improved Grassland Soils Standard have seen their payments and prescriptions aligned with the SFI 2022 scheme announced at the beginning of July (see article of 5th July https://abcbooks.co.uk/sustainable-farming-incentive-2022/ ).  This means the Improved Grassland Soils Standard payment rates have increased considerably.  But as the SFI 2022 payments and prescriptions will not be confirmed until November, there is the possibility payments could alter again.  However, they are not expected to drop back to the initial Pilot levels.  Defra has confirmed the Pilot will use the finalised SFI 2022 rates.

The available capital items have also been updated.  Certain capital items are available under each Standard, these are detailed in the guidance.  If  capital items are chosen these will have to be claimed for through the CS Capital Grants Scheme which will open later this year for SFI Pilot applications.  The deadline for submissions to the Pilot is 1st September 2021

It was announced by the AHDB at the Cereals Event that the levy board was working in collaboration with Defra to produce an industry-standard carbon calculator for farming.  The aim is to have a tool available for the start of 2023.

There are a plethora of different carbon calculators being used in UK farming at present, all with different methodologies and producing different results.  The lack of an agreed, standard, approach causes confusion and hampers both the adoption of carbon reduction practices and the monetisation of carbon saving in UK farming.  A robust process of measurement should provide far more clarity.  

Payment rates under ELMs may be more generous than past schemes as the way they are calculated is set to change.  Defra has announced it is moving away from ‘income foregone’ as the method for setting payments.  This approach was mandated by EU law and meant that no incentive or margin could be included in payments – they were only designed to put the farmer back in exactly the same financial position as if they had not taken up the management option.

In future Defra states it will set payments based on four underlying principles;

• rates will be set to encourage wide participation, whilst fairly and effectively paying farmers
• payments, as far as possible, should pay for outcomes.  These can be delivered through a wide range of activities
• payments should recognise existing natural assets and not unfairly disadvantage those already protecting such assets
• any payments should integrate with a market for environmental outcomes, where participants can earn income from both public and private sources.

These principles are very broad-bush and quite vague – giving little detail on the specifics of calculation.  Any shift in approach is likely to be incremental.  Defra itself states that ‘the basis for the payments will, at least initially, be a cost-based methodology in most cases, that recognises the costs of achieving the outcome and/or the potential loss of income‘ – i.e. little different to income foregone.  However, the Department also states that such a methodology gives a wide range of potential payment rates.  It seems that there will be more of an inclination to push towards higher rates than in the past, to ensure take up.  There will be a limit on this however, as there is also a desire to achieve value-for-money. 

These payment principles will not just apply to ELMs, but also inform payments across the range of Agricultural Transition Schemes.  For more details see – https://www.gov.uk/government/publications/environmental-land-management-schemes-payment-principles

 

Speaking  at Cereals on 30th June, George Eustice announced more details about the Sustainable Farming Incentive (SFI); the first component of Environmental Land Management (ELM) and the one most farmers should be able enter.  These details are different to the SFI Pilot for which those who expressed an interest are now drawing up an Agreement.  These details are for the ‘main’ scheme which will open in spring 2022 for applications to this first phase.  The scheme will then gradually expand until all elements are available from 2024/25 onwards.  Between 2022 and 2024, the SFI will run alongside existing schemes (e.g. Countryside Stewardship).  Farmers will be able to choose which schemes to participate in and can participate in multiple schemes if they wish, but they will not be paid twice for the same action.

In this initial phase, the SFI will concentrate on soils and also introduce the first element of the Animal Health and Welfare Pathway which will be available under SFI.  There will just be four Standards within SFI 2022, these are:

• Arable and Horticultural Soils Standard
• Improved Grassland Soils Standard
• Moorland and Rough Grazing Standard
• Annual Health and Welfare Review

The payment rates and the standards outlined below are indicative, the final versions will be available by November 2021 following further refinements and feedback from farmers and stakeholders.  With regards to payment, George Eustice has said the rates ‘roughly equate to a 30% uplift’ compared with what would have been available under the old EU methodology – a separate Policy Paper has been released which sets out the principles which will be used to set payments (see separate article).

The Standards

No specific management prescriptions are available yet, but below is the general guidance given from Defra;

The Arable and Horticultural Soils Standard and the Improved Grassland Soils Standard – Farmers will be rewarded for management practices which improve the soil structure and soil organic matter.  With the aim of promoting clean water, improving climate resilience, biodiversity and food production.  There will be three ambition levels for each of the soil standards.  The indicative rates are:

Those drawing up their SFI Pilot agreements will be interested in these payments as it appears these will replace those originally offered in the Pilot scheme.  This would see the Improved Grassland Soils Standard payment increasing significantly compared with those offered in the pilot of £6, £6 and £8 per Ha for the Introductory, Intermediate and Advanced Ambition Levels respectively.  Conversely, the Arable and Horticultural Soils payments will reduce slightly for the Introductory and Intermediate (£30 and £47 per Ha in the Pilot) with the Advanced payment slightly more (£59 per Ha in the Pilot).  Of course, until the precise management prescriptions are known, it is difficult to judge how generous the payment rates are.

Moorland and Rough Grazing Standard – Farmers will be rewarded for assessing the range of habitats and features present on their moorlands.  This has the aim of identifying the pressures on them and also the risks posed by wildfires.  For 2022 there will only be an Introductory level; higher levels of ambitions are planned later in the Agricultural Transition.  No indicative payment rate has been announced for this Standard.  The plan is for this Standard to be developed further during the summer with farmers and stakeholders.  It will be finalised by November 2021 along with a payment rate.  This Standard will be available to all Moorland farmers, including those already taking part in Countryside Stewardship.

Annual Health and Welfare Review – This is the initial phase of the Animal Health and Welfare Pathway.  It will involve a Defra-funded yearly visit from a vet.  It is initially planned to be available for three years.  The review will include;

• Data collection to benchmark against the national herd/flock and to track progress on the holding
• Actions to improve biosecurity, including training, capital investment, changes to farm management practices (unclear whether this will include additional funding)
• A review of medicine usage.  Including uploading medicines to an e-medicines recording hub
• Recommendations to improve health and welfare and signposts for further support to help make changes.
• Diagnostic testing for priority diseases – Bovine Viral Diarrhoea (BVD), Porcine Reproductive and Respiratory Syndrome Virus (PRRS) and for sheep, parasitic resistance to anthelmintic treatments.

Payments are expected to range from £269-£775.  The main difference in the rate is due to the costs of the diagnostic tests which vary across the species.

Further Development 2022-24

More Standards – More Standards will be added to the SFI between 2022 and 2024.  Priority will be given to those Standards which make the most significant contribution to the environment, climate and animal health & welfare outcomes and those that have multiple benefits.  Consideration will also be given to as to how each Standard extends the opportunity to more types, location and sizes of farm.  The Standards which are currently under consideration are;

• agroforestry standard
• hedgerows standard
• arable and horticulture land standard
• waterbody buffering standard
• improved grassland standard
• low and no input grassland standard
• farm woodland standard
• dry stone walls standard
• heritage standard
• farmyard infrastructure standard
• orchards and permanent crops standard
• peat soils standard

Animal Health & Welfare – Defra is working with the livestock industry, including vets to ‘co-design’ the Animal Health & Welfare Pathway.  Other components expected include animal health and welfare grants, endemic disease support and piloting payment-by-results.  It is also continuing its commitments to strengthen the regulatory baseline and consult on animal welfare labelling.

Land Management Plans –  The aim is that, eventually, the Sustainable Farming Incentive will involve each farm having a Land Management Plan.  This would be the basis for farmers to decide how, where and when to produce public goods on their land.  It would then also be possible to use these plans as a basis for assessing overall progress towards environmental, climate, and animal health and welfare targets.  This starts to sound more like the Natural Capital approach to paying for public goods which was discussed when ELMs was first conceived.  

Earned Recognition – the SFI Pilot will be used to trial and evidence how earned recognition could operate for the scheme, including how membership of existing assurance schemes might play a role in reducing checks and inspections.

Agreement Lengths & Flexibility – Defra wants to make the SFI accessible to all farmers and are looking at flexibility in agreements and lengths.  The aim is that those who have control of the land for more limited periods of time, such as tenants, are still able to participate fully.  It also wants to make sure that those farming on common land are able to join the scheme, with group agreements looking most likely to be required in order to enter common land into the SFI.  Flexibility to adjust the content of agreements is being considered, as are ways to make it straightforward for a farmer to roll over an agreement if they wanted to do so.

Monitoring & Compliance – Defra has said it will continue to develop its approach to monitoring to make it ‘fairer, more targeted, more proportionate and more effective’.  One of the barriers to entering Agri-environment schemes is the view that inspections are more common and payment can be held up, even when no problem is found.

Defra has provided a progress report on the Agricultural Transition in England.  This update can be found at – https://www.gov.uk/government/publications/agricultural-transition-plan-june-2021-progress-update/agricultural-transition-plan-june-2021-progress-update.   The document mainly covers the new SFI 2022 (see accompanying article) but also provides a review of the initiatives launched to date, and also a timetable for future schemes.  In respect of the latter, it gives a firm opening date for the Farming Investment Fund (capital grants) of October 2021.  The other main topic covered is payment calculations and scheme funding – again, see our separate article for details.