Sustainable Farming Incentive closure: CLA analysis
The decision to close the Sustainable Farming Incentive scheme came as a shock to the industry. CLA experts examine the implications of this decision, provide political and economic context to the history of the scheme, and offer advice for members
Earlier this week, the farming industry was shocked to be told that the Sustainable Farming Incentive (SFI) scheme was closing immediately to applications due to high uptake and budget constraints.
This announcement from Defra came completely out of the blue and has shaken the industry, with widespread condemnation regarding how the announcement was handled. The implications for farming businesses are still emerging.
Defra has published a blog explaining the situation and how those that have engaged with the SFI will be impacted.
The CLA has expanded the table in the blog to provide additional information and analysis.
| Scenario | What happens | CLA analysis |
|---|---|---|
| If you have an SFI agreement | Nothing changes. You will continue to receive payments as normal under the terms of your agreement. In many cases for another three years. If your agreement expires in October 2026, you may be eligible to apply for the reformed SFI offer after your current agreement ends. We will provide more details later this year. If you entered an SFI agreement this year, you will be paid until 2028. | It is some comfort that the government has committed funding for existing live SFI agreements, at least to an extent. The analysis mentions an ongoing payment commitment for another three years, or up until 2028 for newly entered agreements. However, the SFI includes ten-, and five-year actions, with thousands of hectares in these actions. It is unclear if these agreements will be honoured. |
| If you have been offered an agreement but haven't yet accepted | You need to accept your SFI agreement offer within 10 working days of it being offered (as explained in the agreement offer letter). If you don’t, they may withdraw your SFI agreement offer. | CLA members in this category would be advised to consider accepting the agreement offer. The latest information we have is there are around 500 offers made by the RPA that are yet to be accepted. |
| If you submitted an SFI application before the RPA closed applications but have not received an offer | You will be offered an agreement, provided your application is eligible. | CLA members in this category should regularly check on the status of their application with the RPA. The latest information we have is there are around 4,000 submitted applications that are yet to receive an offer. |
| If you started an SFI application but did not submit it before the RPA closed applications | You will not be able to submit your application. The only exceptions to this are a small group of farmers who were blocked from submitting their applications due to a system fault or had requested ‘assisted digital’ support from the RPA to apply, and ex-SFI Pilot farmers whose Pilot agreement has already ended, but they haven’t applied for the full SFI 2024 offer on land that was in their Pilot agreement. | We do not have information on the number of applications that have been started but not submitted. We are aware of members in the group mentioned, that were blocked from submitting their applications. The CLA is urgently seeking clarification on how Defra/ RPA will determine who is included. |
| If you have an SFI Piot agreement or your SFI Pilot agreement has ended | If you are in the SFI Pilot, you will be able to apply when your pilot agreement ends. If you were in the Pilot and your agreement has ended already but you haven’t submitted an application for the expanded SFI offer yet, you will be able to apply. The RPA will let you know how to do this shortly. | We await clarification on how pilot participants will be able to submit expanded offer applications. |
CLA analysis
The announcement came with a high degree of disingenuous messaging from the government. They paint the idea that the funding for SFI24 (as they are calling it, despite contrary encouragement to refer to the scheme as the ‘expanded offer’) has been allocated and that ‘SFI24 has reached its completion.’
It has been made to appear as though this was something that was always planned, however, the reality is that since its launch, the SFI has been hampered by a stuttering roll out, with uptake only increasing significantly in the last 12 months. All while basic payments were relentlessly reduced.
The industry was very much under the impression that the scheme would continue to remain open, with Defra providing assurance that there would be minimal changes for SFI, apart from the addition of new actions later in 2025.
The CLA has made constant and repeated pleas for stability in the SFI offer, which was essential to allow businesses to plan
There had been no hints or suggestions of the scheme closing, with the government committing its support for the SFI soon after it was elected, even expressing a wish not to upset the applecart. The reality is this decision and the way it has been communicated could not be more destabilising for the industry.
The government claims the current total of 37,000 live agreements is a success, and while the scheme has gathered momentum, this is still a minority of the 102,400 farm holdings in England. Defra’s seemingly forgotten ambition of getting 70% of farmland and farmers into the scheme looks to have fallen well short. While processing times for applications have slowly improved, glitches and issues with the application system have prevented many agreement holders from applying.
The government seems to want to have it both ways: criticising the previous government for designing a scheme that did not have appropriate spending controls but wanting to be praised for being in power when scheme uptake has continued to grow. Farmers are unlikely to feel much appreciation of the government, and the relatively recent success of the scheme has little to do with them.
The decision to close the scheme is supposedly based on affordability and a constrained Defra budget. These claims have been met with industry scepticism, particularly considering the agriculture budget underspend in each year since cuts to the Basic Payment Scheme was introduced, without taking into consideration the significant increase in the rate of cuts in 2025.
Transparency on how the agriculture budget is allocated has been non-existent, despite repeated requests from the CLA for Defra and ministers to offer an explanation. However, the day after the SFI closure announcement, Defra published this blog providing a breakdown of the £5bn spending commitment over the 24/25 and 25/26 financial years. Defra says it reached its limit of £1.05bn in SFI spending in 24/25 and 25/26, hence the need to close the scheme. However, it remains unclear how this figure relates to the annual scheme spend figures from the Rural Payments Agency (RPA).
Even if the budgetary constraints can be explained, the government’s and Defra’s ability to communicate honestly with farmers is drawn into question. The blog released yesterday contains the first mention of a cap of any size on the SFI. CLA members have not forgotten a similar event regarding the sudden closure of the capital grants scheme in November 2024, which was again due to apparently unforeseen budgetary constraints. It remains a mystery as to why the same mistake has been made again with the SFI.
Impact on the agricultural sector
The decision creates fundamental uncertainty around the ability to meet the legally binding Environment Act 2021 targets, with SFI a key delivery vehicle for many of these.
There are several million hectares under the soil management SFI measures and no hectares in others according to the latest uptake data. EA targets under threat include the underlying goal to halt the decline in species abundance in 2030 and reduce nitrogen, phosphorus, and sediment pollution from agriculture by at least 50% by 2038. Agroforestry was a key aspect for the government in meeting its target to increase tree cover in England from 14.5% to 16.5%, though the SFI scheme has contributed just 900ha of agroforestry or 0.01% towards this total.
It will take time for the various implications of this decision come through, though the cash flow impacts for farming business hoping to participate in the scheme will be at the forefront for many. Those expecting SFI payments later in the year for agreements that have not been applied for will have to consider their plans carefully. The CLA is already hearing reports of farmers having to change their cropping and future business plans, and of farm tenants that will struggle to pay their rent.
The vision for the SFI was a pioneering, world leading scheme that would reward farmers with public money for delivering public goods. However, CLA members could justifiably feel unable to plan their business operations around what has proven to be such a fraught and unreliable government scheme.
Trust in the government and Defra has been severely affected and it will take a long time to recover.
SFI redesign
The government has said it will launch a new version of the scheme and hopes to engage with the industry over its design. The scope of the scheme will depend on the outcome of the spending review in June and Defra’s settlement, though is not expected to open until early 2026. This press release contains some high-level detail regarding a future SFI offer, including a desire to cap the SFI budget and to better target SFI in a ‘fair and orderly way.’ The actions that were due to be added to the scheme this year will be incorporated in the next version.
The CLA will engage in this co-design process over the summer. Expectations are that the scheme will not be open for applications until early 2026.
Conclusion
The CLA will continue to push against this disastrous decision and is working with Defra to highlight the issues it raises. We are urgently seeking clarification on points where there is significant uncertainty.
As ever, the CLA is eager to hear from you, particularly on how this decision impacts your businesses. Please contact cameron.hughes@cla.org.uk or your regional office.