Farm funding: implementing new approaches

Farm support in the UK is changing. The UK took part in the EU’s Common Agricultural Policy (CAP) for decades. In 2019, the UK received some £4.7 billion of CAP funding. Around 80% of this was provided as ‘direct payments’ under the Basic Payment Scheme (BPS) based broadly on how much land was farmed. A further tranche of CAP money was spent on rural and environmental programmes such as England’s Countryside Stewardship (CS) scheme.

Since Brexit, the Agriculture Act 2020, has been passed to provide a legal framework for the Government to develop very different approaches to supporting agriculture in future. The Government has guaranteed the current annual budget to farmers in every year of this Parliament, ending by 2024. However, in England this money will be spent in different ways in future. The Government is phasing out CAP-style direct payments and is introducing payments for farmers to provide public goods such as environmental and animal welfare improvements. These changes are taking place during a seven-year ‘Agricultural Transition’ period running from 2021.

2023 is the last year in which BPS will be paid. From 2024 to2027, delinked payments will be paid each year. Farmers will receive delinked payments based on their BPS payments in 2020-22, provided they are eligible for and claim BPS for the 2023 scheme year. Delinked payments rules will not require farmers to hold land or continue to farm. Legislation will be introduced in 2023 to make these changes.

The Library briefing on the Agriculture Act 2020 sets out detailed information and stakeholder views on the policy aims of the new funding framework. This briefing focuses on the subsequent development and implementation of new schemes, in particular the Environmental Land Management (ELM) schemes. The paper was updated to reflect broad policy developments in the four parts of the UK since publication in July 2022, including to environmental management schemes in England. For future updates on farm schemes see Defra's farm blog which provides a rolling update on developments.

This briefing focuses mainly on England. Agricultural policy is a devolved matter, so the four nations of the UK have developed their own policies, with national legislation being introduced where required. More detail on this is provided in the Library briefing on the Agriculture Act 2020.

New schemes in England

Defra is gradually introducing new schemes under the provisions of the Agriculture Act 2020. The main part of this new approach is known as Environmental Land Management (ELM). It has three main strands, being introduced in stages:

• Firstly, in 2022, all farmers who are paid Basic Payment Scheme (BPS) funds can apply for funding under a new Sustainable Farming Incentive (SFI) scheme.
• Secondly, a Local Nature Recovery (LNR) scheme will provide a successor to the Countryside Stewardship scheme. It will pay for locally-targeted actions to make space for nature alongside food production. Examples of funded actions are managing and creating habitats as well as adding trees or hedgerows to fields.
• Thirdly, Landscape Recovery (LR) will focus on large-scale, long-term, significant habitat restoration and land use change.

The Countryside Stewardship (CS) scheme set up under the CAP remains open while these new environmental schemes are being phased in. The UK is funding new CS schemes in 2022 and 2023. The last new CS schemes will start in January 2024. Farmers may apply for a new environmental scheme whilst also receiving CS payments, provided the same land is not claimed for twice.

Separately, funding will also be provided for productivity improvements and innovation on farms. Other schemes to support animal health and welfare improvements for example are also being developed.

What do stakeholders think?

Farm representatives and green groups broadly welcomed the new farm support policies during the passage of the Agriculture Act 2020. There was general support for replacing the CAP system of paying farm subsidies based on the area farmed and instead paying farmers to provide public goods such as environmental and animal health improvements. However, farm groups were concerned that food production in itself was not included in the list of purposes for which funding could be provided.

Farmers have also expressed concerns about implementation of the new approaches. Particular concerns are the timescales for the new measures to be implemented and the extent to which the new schemes will provide farmers with enough support. The Public Accounts Committee has criticised the Department for Environment, Food and Rural Affairs’ “blind optimism” over the schemes’ introduction, and the insufficient detail on how the schemes will make up for the ending of current approaches.

Farmers and the Government want the claims processes and IT systems supporting to be simple and effective. The CAP scheme had complex application and compliance processes which caused problems for farmers. The Rural Payments Agency’s record for processing claims was widely criticised for many years. The National Farmers’ Union (NFU) is working with the Government to co-design new schemes.

Defra has said that it is maintaining total farm support in every nation of the UK, worth a cumulative £3.7 billion a year, and is rolling out ELM schemes to pay farmers for delivering climate and environmental benefits while producing the nation’s food.