Category: Policy & Business

The Welsh Government commenced its ‘Data Confirmation’ excercise on the 22nd July which will run until 6th December.  This allows farmers to update the mapping information held.  This especially relates to the habitat and tree areas on farm, ahead of the introduction of the Sustainable Farming Scheme (SFS) in 2026, when the 10% requirement will be introduced.  It is also relevant to the Habitat Wales Scheme (HWS) which will operate again in 2025 as an interim scheme.  Next year, the application for HWS will be via the SAF rather than a stand-alone application.  There is no compulsion on farmers to check and update their data, but it is strongly advised to get them into a good postion to make future claims.  More details can be found at – https://www.gov.wales/sustainable-farming-scheme-how-complete-your-data-confirmation-form.

Defra has consistently underspent on the farm budget during the Agricultural Transition.  There is a danger that the shortfall will be clawed-back by the Treasury given the spending pressure on the Government.

The figures come from The Farming and Countryside Annual Report (see https://www.gov.uk/government/publications/farming-and-countryside-programme-annual-report-2023-to-2024).  This sets out that Defra planned to spend £2,267m on farming and the environment in 2023/24.  This is, in itself, someway short of the £2.4bn per year on average promised by the previous Government.  In reality, the Department distributed £2,136m during that period – a shortfall of £131m.  This comes on top of under-spends of over £100m in both the 2021/22 and 2022/23 financial years.  Spending those years was £2,294m and £2,230m respectively.

This is funding promised to the farming industry that has not been paid.  There has been a suspicion that the deductions in the BPS which started in 2021 were generating a pot of money that Defra was struggling to ‘recycle’ though other schemes – not least because the flagship SFI was slow in getting started.  The Department had been somewhat opaque on the budget but these figures seem to confirm the suspicion.  It had been assumed (or hoped) that underspends in earlier years would just be rolled-forwards and could be used in later years once, for example, the SFI got up to speed.  However, it is now reported in the press that the Treasury is eyeing some of the underspend to help pay for shortfalls elsewhere in Government.  None of this seems to bode well for the next allocation of agricultural funding which may be announced with the Budget on the 30th October.   

The Scottish Government has published the BPS rates for this year.  The table below sets out the breakdown between Standard BPS and Greening, plus last year’s rates.  The rates are very similar to 2023 – Regions 1 and 3 have gone down slightly, with Region 2 up by just 2p.  The latter will be due to slightly less entitlements being claimed in those Regions this year and the former due to more claimed.  Advance payments commenced on 4th September.

As of July 2024, there were 23,200 live SFI 2023 agreements, according to data published by Defra.  There has been a 67% increase in the number of agreements since April 2024.  Many of the actions have seen similar proportional increases in uptake, with the area covered by 16 of the 24 available actions at the time, increasing by between 60-70%.

The largest increase in area since the April 2024 dataset is for grass buffer strips on arable and horticulture land and flower rich margins.  Both of these options have increased in area by 74%.

By far the most popular option is the soil management plan and organic matter testing (SAM1).  There is now 2.65 million hectares under this option – up by more than 1 million hectares since April.  Given the total farmed area in England is around 9m Ha, this suggests that a minimum of 30% of farmland is now under a SFI agreement. 

A total of 133,000 kilometres of hedges have been placed into the assess and record hedgerow standard.  Of this, 95,000 kilometres are now being managed according to the prescriptions of SFI.

For arable farmers, there is a clear interest in actions such as no use of insecticide, which is taking place on 678,000 hectares.  Cover and companion cropping is taking place on 199K and 151K hectares respectively.  Many of the farms entering land into these standards will have already being carrying out these practices.  There is a total of 154,000 hectares in the actions which are limited to 25% of farm areas.

Legume fallow is one action which may yet see further uptake.  Defra has changed the action back to a rotational option, having made it static in May this year.  At present approaching 86,000 hectares is entered into the action.  Full details on SFI uptake can be found at – https://www.gov.uk/government/collections/annual-countryside-stewardship-and-environmental-stewardship-summary-data .

Policy Direction

With the change of Government there could have been a change to agricultural policy, but the new Defra Ministers have confirmed that they are fully committed to Environmental Land Management (ELM) and they want to ‘maintain the momentum’ built up over recent months.  Defra has said work is being carried out on how the schemes and grants can produce the right ‘outcomes for farmers, food security and nature recovery in a fair and orderly way’.  Quite what this means for farmers and the schemes available is currently unclear.  There has been reference to schemes delivring value for money, but it is very hard to prove the precise contribution of schemes to environmental outcomes, and then even harder to put a value on this.

SFI 2024 Roll-out

The expanded SFI 2024, offering 102 options, is currently still only available via the controlled roll-out.  Those interested must first complete an expression of interest and then the RPA will ‘invite’ them to apply.  We are experiencing differing lengths of waiting times for ‘invites’.  We expect this depends on size, complexity, type of farm and whether another agreement already exists as this is being used to test the system before rolling it out to everyone – it is not simply a first-come-first-served process.  There is no indication when SFI 2024 will be made open to all. 

Scheme Guidance

Guidance on the individual Actions has been amended a couple of times since it first came out in May, the latest version can be found via https://www.gov.uk/government/publications/sustainable-farming-incentive-scheme-expanded-offer-for-2024.  This web page also has a link to the Terms and Conditions, which have also been amended, our article of 2nd August reported these (see https://abcbooks.co.uk/sfi-2024-rule-changes/) including the removal of the annual upgrade provisions.  There is also a search facility for all the actions available via this page – similar to the CS Grant Finder, as well as general scheme guidance.  Many of the recent updates to the actions are to do with compatibility of the options with each other.  But notable is the change to CNUM3 – Legume Fallow, which is rotational again (!).  The ‘general’ scheme guidance has also been updated to include an Annex C which shows the Supplemental action you can do with each Base Action i.e. Grazing Supplement or Haymaking Supplement can be carried out on Low Input Grassland (the Base Action).

Endorsed Actions

Some of the actions under the SFI will target priority habitats or species, or heritage features and applications including these will require ‘endorsements’ from Natural England or Historic England.  The first endorsed action is now available – GRH6: Manage Priority Habitat Species-rich Grassland.  This action was much publicised when the expanded offer was introduced as the payment increased considerably from previously (GS6 was £182 per Ha and now GRH6 is £646 per Ha).  We have been waiting to find out how we get these actions endorsed, but it seems relatively straight forward to apply for;

• select the relevant SFI action and which land the action is going to be done on in the SFI application
• submit the application
• Natural England or Historic England, as relevant, will be in contact about the endorsement process for the action – they may need to visit the land to confirm it’s suitable for the selected endorsed SFI action – with regards to GRH6 the assessor will check that the area is either already priority habitat species-rich grassland or that it has the potential for the restoration or creation of priority habitat species-rich grassland.

Although the process seems relatively straightforward, Defra has said agreements which include actions that require endorsement will take longer to be offered and therefore applicants may want to include these on a separate agreement if there are other actions being claimed so that the endorsement is not holding up the whole claim.  Currently only GRH6 is available.  Other endorsed actions will be added later in 2024 including ones on wildlife, heritage, wood pasture, orchards, coastal habitats and waterbodies.

Into 2025

Whilst there has been no official announcement, it is strongly beleived that there will be no major changes to the SFI for 2025 – or at least the early part of the year.  There may be the now-usual ongoing tweaks but we do not expect a further tranche of options to be added – beyond the endorsed ones outlined above.  This is especially likely to be the case if the new Government wishes to see how the present scheme performs.   

Capital Items

The SFI does not include capital items, but the agri-environment Capital Grants offer has increased considerably over the last few years.  It is available as a stand-alone grant or can be used to support an SFI application.  To this end a further eight items have been added to support some of the new SFI 2024 actions, these are;

• AF1: Plant an agroforestry woodland tree
• AF2: Plant an agroforestry fruit tree
• AF3: Supplement: Species diversity bonus
• TE6: Tree guard (tube and mesh)
• TE7: Tree guard (wood post and rail)
• TE8: Tree guard (wood post and wire)
• PA4: Agroforestry plan
• PA5: Moorland mapping plan

In total there are now 105 capital items under this programme.

Annual Declaration

Each year agreement holders have to submit an Annual Declaration to confirm that they have delivered against their agreement for that year.  This must be completed to receive the final payment for that year.  The Declaration must be submitted within the last two months of each relevant agreement year i.e. an agreement start date of 1st October can submit from 1st August to 30th September.  ‘Early adopters’ of the SFI 2023 should be able to submit their first Declaration now.  RPA will notify agreement holders when their annual declaration period begins – no confirmation yet whether this is via e-mail or through ‘Messages’ on Rural Payments.  The Declaration can then be accessed and completed online in Rural Payments via farmers’ ‘Business Overview’ page.

The first instalment of delinked BPS payments have been sent to English farmers.  The RPA confirmed that as of 5th August, 98% of eligible farmers had received their advanced payment.    This is the first of two instalments this year.  The RPA has also brought forward the second instalment, which this year will be paid from 30th September (instead of 1st December).  Delinked payments will continue during the Agricultural Transition until 2027.  These will decline each year by a set deduction, although as of yet the deductions for 2025 – 2027 have not been released.  These are not expected to be announced until the Spending Review which will be held on the same day as the Budget – 30th October.

On the 1st August the Bank of England cut Base Rates by 0.025% to 5%.  This is the first reduction in rates since March 2020.  It comes as the headline inflation rate (CPI) for both May and June was exactly on the BoE’s target level of 2%.  However, most commentators believe that further rate cuts are unlikely until well into the autumn as the Bank is still worried about underlying ‘core’ inflation.  The vote for the August cut was narrow, with a 5 to 4 majority.  A return to the ultra-low interest rates of the period 2009 to 2022 seems very unlikely.  The market has priced-in rates settling in an band between 3% and 4% in the next two to three years (barring any further economic shocks).  

The RPA has made some changes to the SFI 2024 rules.  The most controversial amendment will be the removal of the ability to annually ‘upgrade’ and ‘add land’ to an agreement.

The ability to amend an agreement was previously allowed and was seen as one of the ‘selling points’ of the scheme; giving agreement holders more flexibility to increase their ‘ambition’ each year via a relatively simple procedure and the agreement still finishing after the original length of time.  Under the new rules, if agreement holders wish to apply for new actions or additional land they will have to apply for a separate agreement.  Whilst this does not prevent agreement holders from increasing their ‘ambition’ it will mean having multiple agreements to manage which will end at different times.  It is probable that agreement holders will be less likely to increase the land and actions under the scheme until the 3-yearly renewal; it seems a real shame this facility has been removed.

One exception to this new rule is for rotational actions; for these, the rules will remain the same – where agreement holders move a rotational action they will be able to;

• increase the area entered into the action
• decrease the area as long as it’s no less than 50% of the area entered for the first year of the action’s duration.

Other amendments to the SFI rules deal with how agreements will work when they include actions for both 3-years and 5-years.  The new terms and conditions state ‘the agreement is for a period from the agreement start date until the latest Action End Date’.  But it qualifies this by saying ‘where the agreement document specifies actions of varying lengths the terms of the agreement shall apply in respect of the relevant action from the date the action starts until the date the action ends’.  It goes on to say ‘the action will expire after the action end date and the relevant land shall no longer form part of the land described in the agreement‘.  We understand this to mean that where an agreement has actions which run for 3-years and 5-years, the land which is subject to 3-year actions will be ‘free’ to put back into another agreement once the 3-years has completed.

The ‘Management Control’ conditions have also been updated – ‘Management control is for the duration of the agreement or until the action end date‘.  So where an action runs for 5-years, agreement holders must expect to have management control of the land for 5-years.  This is something that prospective scheme applicants need to bear in mind as it is not usually possible to transfer an agreement to another person if, for example some or all of the land is sold or the tenancy on the land ends, and there’s a new tenant.  However, where this does happen agreement holders will need to email or write to the RPA as soon as possible.  The land will then be removed from the agreement.  The holder may have to repay some, or all, of the payments already received during the agreement year in which the transfer of land took place if they:

• have not completed their selected SFI actions
• have submitted their annual declaration for that year

Unlike previous schemes, the RPA will not apply additional financial ‘penalties’.  Once the RPA has removed the land from the agreement, the new occupier should be able to apply for an SFI agreement on that land.

All the updated terms and conditions and SFI scheme information can be found via https://www.gov.uk/government/publications/sustainable-farming-incentive-scheme-expanded-offer-for-2024

 

The e-mail RLE1 service in England ended on 31st July.  As from 1st August, those wanting to make mapping changes to their land on Rural Payments can either use the digital service, called ‘Rural Land Changes’ on their RPA accounts, or use a paper version of the RLE1.  Rural Land Changes was introduced at the beginning of year with the aim of reducing the turnaround time for getting mapping requests complete.  Our article in January gives futher information on what can and can’t be done via Rural Land Changes (see https://abcbooks.co.uk/rural-land-changes/).

A reminder that the succession rules under Agricultural Holdings Act (AHA) tenancies are changing as from the 1st September.  This is one of the changes brought in by the Agriculture Act 2020.  The previous ‘Commercial Unit’ test will be scrapped – this effectively meant someone could not take on the tenancy if they already had control of a large enough holding.  From the 1st September there will be three conditions for succession.  There are two ‘eligibility tests’ – firstly the potential successor must be a close relative to the previous tenant; secondly the successor must have derived their principal livelihood from the farm.  Then, the third condition is a ‘suitability’ test.  The person wishing to take over the tenancy must have the right level of experience, skills, financial standing and capability to take on the farm.  This test has been strengthened as a qui-pro-quo for the removal of the Commercial Unit test.