Sustainable farming incentive pilot

CLA Senior Policy Adviser Harry Greenfield delves into the detail of Defra’s first pilot as part of the new Environmental Land Management policy and how the Association will be helping to shape the pilot process

Since Defra announced it would replace the Common Agricultural Policy (CAP) with a new policy of paying for public goods in England, the CLA has been working hard to ensure this new system works for our members. 

Building on the ideas set out in the CLA Land Management Contract report (published in 2018), we have welcomed the broad thrust of the new policy but have set about the task of helping to shape the all-important details. 

This week saw a further step in the development of the new Environmental Land Management (ELM) policy with Defra’s releasing details about the 2021 pilot of the Sustainable Farming Incentive (SFI). 

With the first pilot agreements due to go live in October this year, and the first payments to those participating going into bank accounts the following month, this is the first chance to see what ELM might actually look like on the ground. 

The SFI is based around a series of standards for environmental assets such as grassland, soil, hedgerows or woodland. Each standard sets out a series of management actions required on that land or feature in return for a payment per hectare, unit or metre. Each standard has three levels of ambition: introductory, intermediate and advanced, with higher payments as the levels increase. The CLA members’ briefing published this week summarises Defra’s proposals, which can be read in full here.

CLA analysis

How does the SFI shape up compared to what the CLA would like to see? Well, the SFI pays for sustainable farming and forestry practices, recognising the important contribution that the agriculture sector can make to delivering public goods in the way they manage farmland and farm woodland. 

Environmental land management is not just about setting aside land for wildlife habitat or tree-planting but also incentivising good management practices as part of a profitable business. What happens in the fields can be as important to the environment as what happens at the edge of fields. We made this point in our Land Management Contract report. 

The pilot process itself is very important. The planned early introduction of SFI to everyone in 2022 means that Defra has had to rapidly develop this scheme, and many areas need to be tested, including the detail of the design, administration processes and payment rates. The pilot will help to resolve the remaining issues, as will the continual learning as the full SFI is rolled out from 2022. 

It's worth remembering that the SFI is only one of three ELM schemes. The Local Nature Recovery (LNR) scheme will pay for more complex environmental management, focused on delivering local priorities. Meanwhile, the Landscape Recovery Scheme (LR) will pay for large-scale projects involving land use change, for example, woodland creation or large-scale habitat restoration. For those land managers with experience or interest in ambitious environmental management, these schemes could offer high rewards in the future. The SFI, however, is aimed more squarely at the majority of farmers, including those who have not previously engaged with agri-environment schemes. 

Room for improvement

There are some areas where the SFI does not yet align with our position:

  • The payment rates, at least for the pilot, are based on Countryside Stewardship and so on income forgone and costs. We know from experience that while these payments will be attractive to some, they are unlikely to lead to the near-universal uptake Defra aspire to. 
  • The eligibility for the scheme is too narrow. It is only for those currently receiving Basic Payment Scheme (BPS) payments (an arbitrary decision aimed at making administration of the pilot easier) and even in the future may be limited to farmers only. This risks large areas of land managed by those who are not farmers being left out. 
  • Defra risks creating a confusing landscape, with SFI pilots this year, a separate version of SFI available to all farmers next year, and continued availability of Countryside Stewardship. Without more information and clarity, land managers may struggle to decide which scheme to enter. 

Defra is at pains to point out that what is being piloted is not a finished product, and that changes can be made based on what does and does not work in the real world. The CLA will be holding them to this commitment, making sure the pilot really is a pilot, leading to material changes to the scheme where these are needed. 

More fundamental than these problems, which we hope can be ironed out over the course of the pilot, is the question of where the SFI goes in the medium to long term. With the loss of BPS and the climate and ecological crises, many people would argue that the agriculture sector is in need of a radical transformation. SFI, as it is being piloted, does not necessarily deliver this scale of change. Already there have been criticisms that the standards, at least as they are set out in the pilot, are paying for things are already covered by regulation, replicating requirements from cross-compliance and the Farming Rules for Water. 

At the other end of the spectrum, those farmers operating at the highest levels of sustainability, such as organic or regenerative agriculture, feel that the SFI standards do not go far enough. They are delivering more public goods than even the highest level within the SFI and will not be fully rewarded for this.

As an interim measure to help cushion the blow of the loss of direct payments, the SFI is welcome, but whether it constitutes a long-term justification for spending public money is a discussion the industry should be having now.