Defra spending plans confirmed for the next three years

Following last week’s spending review, this week saw the publication of a blog by Defra, setting out high level details on how the agriculture budget will be spent over the financial years 2026/27, 2027/28 and 2028/29.

This included news on the remaining delinked payments, Environmental Land Management (ELM) schemes, productivity, innovation and transition spending and ‘nature schemes’.

The spending review stated that the remaining delinked payments will be scaled down ‘rapidly’. This was confirmed with this week’s news that reference amounts (the average Basic Payment Scheme (BPS) payment in 2020, 2021 and 2022) up to £30,000 will be reduced by 98%.

Effectively, this means that the maximum any business will receive in 2026 and 2027 (the final year of payment) will be £600 per year. This compares to a maximum payment of £7,200 in 2025, with payments due out from 1 August.

The proposed cuts are dramatic, but not unexpected. It means that the value of BPS payments will drop from an estimated £320m in 2025, to £20m in 2026 and 2027. It will hit those whose profit margins were already very slim especially hard.

The £600/year payment may seem disproportionate compared to the administrative payments incurred by the Rural Payments Agency (RPA) in delivering this. However, a seven-year transition period scaling down BPS is a requirement under the Agriculture Act 2020.

ELM seems to be the only pot within the budget that government is willing to grow and will be where the majority of the recycled delinked payments are directed. This will likely be via the next version of the Sustainable Farming Incentive (SFI), capital grants, and to a lesser extent Countryside Stewardship Higher Tier and Landscape Recovery. Though some individual agreements themselves are due to continue beyond 2028/29, funding guarantees beyond this point are uncertain.

There is a possibility that the government would be happy to reduce its spending commitment, should the private market be ready to fill the void without compromising the government’s environmental targets. Members should explore these schemes whilst they are still available, treating suitable incentives as bonus payments on top of the core business enterprises.

Having demonstrated interest in grappling with farming profitability through initiatives such as the recently launched Farming Profitability Review and farming roadmap, the government clearly wishes to put productivity, innovation and transition spending on a downwards trajectory.

Spending on this area is set to reduce by £100m over the 2026/27 – 2028/29 period, having totaled as much as £400m in recent years. One reading of this is that the government is willing to offer short-term support for farmers to increase their profitability and productivity, before leaving to get its own house in order.

As before, we would encourage CLA members to take advantage of these productivity schemes if they complement their business plans. The current round of the Farming Equipment and Technology Fund remains open for applications, closing on 10 July.

It is less clear exactly what is included in this grouping, worth £450m/year from 2026/27 – 2028/29, though indications are that it will be for trees and peatland restoration. It is possible that this will include funding for the England Woodland Creation Offer and other schemes previously funded by the Nature for Climate restoration fund, but this is unclear.

We understand Defra to be in ‘business planning’ mode over the coming months and it may be autumn until this process completes. The CLA will continue pushing for clarity on scheme launch timelines and in particular for the re-opening of SFI.