House of Commons - Environment, Food and Rural Affairs Committee

Farming in the Uplands - Environment, Food and Rural Affairs Committee Contents

Written evidence submitted by Department for Environment, Food and Rural Affairs

INTRODUCTION

1. This memorandum sets out the Government's current thinking on farming in the uplands of England, drawing on the considerable evidence base that already exists.

2. This is primarily drawn from the reports below:

— Farming in the English Uplands, Defra Agricultural Change and Environment Observatory, May 2010.

— Uplands Farm Practice Survey, Defra, 2009.

— Commission for Rural Communities (CRC): High ground, high potential—a future for England's Upland communities.

— Economic and environmental impacts of changes in support measures for the English Uplands: An in-depth forward look from the farmer's perspective, Countryside and Community Research Institute and Food and Environment Research Agency.

THE GEOGRAPHY OF THE UPLANDS

3. There is no statutory definition for the uplands. Within this Memorandum, Less Favoured Areas (LFA) boundaries have been used to define an "upland" farm[4] (see fig.1). Recognising that agricultural practices can vary significantly by region, the 2009 Upland Farm Practices Survey identified nine separate upland regions.

4. 74% of England's National Parks fall in LFAs. One of the statutory roles of National Parks is to conserve and enhance their natural beauty, wildlife and cultural heritage. In total 62% of the LFA is designated as either a National Park, Areas of Outstanding Natural Beauty (AONB) and/or SSSI. Many SSSIs are also designated as Special Protection Areas (SPAs) and/or Special Areas of Conservation (SAC).

THE HABITATS OF THE UPLANDS

5. The uplands are a mosaic of semi-natural habitats that vary considerably across these regions. They are largely, but not exclusively, above the upper limits of enclosed farmland and are mainly open expanses shaped to some extent by human activities.

6. A wide range of habitats are found including wet and dry dwarf shrub heaths, blanket bog and other mires, scrub, bracken and grasslands (including acid, calcareous and neutral). There are also montane habitats, occurring on the highest fells above the natural tree-line, and rocky outcrops, screes and limestone pavement. Larger enclosures (referred to as allotments, intakes or newtakes) supporting similar vegetation are often included, eg upland calcareous grassland is generally enclosed. Upland woodland may also be present. Each of these upland habitats supports a range of species.

7. Rough grazing occurs on unenclosed moorland and large-scale, extensively managed enclosures. In addition, there may be enclosed areas of better grazing or "in-bye" land which may have been improved to some degree, although important unimproved grasslands also occur locally. Upland Hay Meadow is an entirely closed "in-bye" habitat.

8. More detail on the characteristics of upland habitats can be found in Annex A.

THE CHARACTERISTICS OF UPLAND FARMING

9. The principal output of farming in the uplands is livestock (beef and sheep meat production) although dairying is also important in some regions. The uplands system of livestock farming has long been seen as an important contributor to the national beef and sheep industries by providing breeding and finishing stock to lowland farming systems. This is particularly notable in the stratified structure of the sheep industry in the UK. As of June 2009, 44% of sheep in England were located in the uplands.

10. The majority of farms are very small and either long established or first generation family farms. Around half of the land is owner occupied with most of the remainder under tenancies of 1 year or more. Only 5% of land is rented for less than one year. Most upland farmers own at least part of the land on their holding and about a quarter have a combination of tenure arrangements, mostly a mixture of owner occupation and longer term (more than one year) tenancies. Very few upland farms (0.5%) have share or contract farming agreements.[5]

11. Much of the unenclosed, unimproved grazing in the uplands is common land (approximately 14% of land in the LFA and 37% of land above the "moorland line"[6]). Most commons have an owner but commoners (generally, neighbouring farmers) have rights to graze livestock on them. The combination of grazing rights and statutory protection means that common land is uniquely protected from development and agricultural intensification. In terms of heritage and many environmental factors, this can be beneficial. However, the multiple interests in common land can make consensus difficult to achieve, and this sometimes results in poor or ineffective management. There is evidence[7] for declining levels of grazing on some upland commons, and the special nature of grazing practices such as hefting on common land may make the reduction or cessation of "commoning" costly or impossible to reverse.

12. As Figure 2 below shows, trends in upland and lowland sheep breeding numbers are broadly the same due to the stratification of the sheep industry—both lowland and upland systems being reliant on each other. Upland sheep breeding numbers in England appear higher now than in the mid 1970s, shortly after the UK joined the EC, although direct comparisons are made difficult due to definitional changes.

Figure 2

SHEEP BREEDING FLOCK NUMBERS IN ENGLAND

(a) 1975 definition of LFA before widening to include Disadvantaged Areas, excludes minor holdings.

(b) Current LFA, excludes minor holdings.

(c) In 2006, the method of assigning LFA markers to holdings was revised and retrospectively applied from June 2000. All holdings.

Source: June Survey

13. Figure 3 shows that suckler cow numbers in the uplands have maintained a far more consistent level throughout the period of European Community membership, unlike in the lowlands where numbers have fluctuated more significantly.

Figure 3

BEEF COW NUMBERS IN ENGLAND

(a) 1975 definition of LFA before widening to include Disadvantaged Areas, excludes minor holdings.

(b) Current LFA, excludes minor holdings.

(c) In 2006, the method of assigning LFA markers to holdings was revised and retrospectively applied from June 2000. All holdings.

Sources: 1975-2006, June Census/Survey, Defra; 2004 onwards, CTS/RADAR, Defra.

14. Figure 4 shows that dairy cow numbers have remained fairly consistent in the uplands since the mid 1970s, shortly after the UK joined the EC, whereas national numbers have declined steadily, especially since the introduction of milk quotas in the early 1980s.

Figure 4

DAIRY COW NUMBERS IN ENGLAND

(a) 1975 definition of LFA before widening to include Disadvantaged Areas, excludes minor holdings.

(b) Current LFA, excludes minor holdings.

(c) In 2006, the method of assigning LFA markers to holdings was revised and retrospectively applied from June 2000. All holdings.

Sources: 1975-2006, June Census/Survey, Defra; 2004 onwards, CTS/RADAR, Defra.

FARMING'S ROLE IN UPLAND COMMUNITIES

15. Farming plays an important role in the life of uplands communities. Although, as the CRC report identifies, the agriculture and forestry sector now employs a low proportion of the uplands workforce (5.2%), agricultural businesses are the second most common, accounting for 16% of all businesses in the uplands.

16. Although much of the income to the uplands regions is derived through recreation and tourism, with 40 million visitors to the National Parks in the uplands each year generating £1.78 billion,[8] farmers benefit from relatively little of this tourism income.

17. Farmers are often seen as the glue that holds the community together—which generates a strong protective feeling towards farmers from those living in the uplands—and a real fear that their subsequent loss would destroy the community. Evidence shows that the public sentiments are that local economies and communities would suffer if farming was allowed to decline and that there would also be a detrimental impact upon the way the landscape looks.[9]

18. This is reinforced by views that farming in the uplands requires a special type of farmer with very strong links to family and custodianship. Often farming families have been living in the uplands for many generations and this long establishment has created local leaders from the farming community. The collaborative nature of "commoning" can also aid cohesion in upland communities.

ROLE OF FARMING PRACTICES IN MANAGING THE UPLANDS ENVIRONMENT

Grazing

19. An appropriate level of grazing is needed to maintain and restore certain upland habitats such as upland hay meadows and calcareous grassland and their characteristic species. Having a mixture of livestock grazing types is important with cattle and sheep having different grazing characteristics. There are also some habitats such as blanket bog that require very little or no grazing. Therefore, ensuring the appropriate balance of grazing through correct timing, stocking density, and species employed for the habitat in question is crucial for successful management.

20. Overgrazing—particularly with high stocking densities of sheep—has impacted on upland habitats. Overgrazing has been the main contributing factor on those upland SSSIs in unfavourable condition—although there have been significant improvements made in recent years. In 2008 of those SSSIs in unfavourable condition, 31% of the area of upland heathlands and 58% of the area of blanket bog was due to overgrazing.[10] Overgrazing, especially by sheep which are more selective, allows coarser, less palatable species to encroach. Only the most competitive will survive. Overgrazing does not allow vegetation to recover and therefore sensitive species are lost.

21. There are a range of environmental effects from overgrazing that impact upon wildlife, soil structure, water quality and carbon emissions. Birds can suffer from reductions in availability of nesting sites for those species preferring higher sward levels for nesting. Ground nests are more vulnerable to trampling when high stock densities occur. Reductions in food sources can also become a problem in areas of high grazing. Small mammals may lose ground cover increasing their risk of predation.

22. If vegetation cover is heavily grazed, soils become more exposed and may be eroded—made worse by poaching of the ground and compaction from trampling by high densities of livestock. Run-off from compacted ground can lead to detrimental effects on water quality from excess nutrient and pathogenic bacteria. This can have subsequent damaging consequences to aquatic life from sedimentation and eutrophication.

23. One of the most sensitive habitats to grazing is upland blanket bog because of the low growth rate of the vegetation and the erodible nature of the deep peat soils beneath it. The consequences of overgrazing peat bog can result in release of carbon dioxide through loss of vegetative cover leading to drying out of surface layers or in extreme cases erosion. The interaction between grazing animals and peat bog maintenance is, however, complicated. The natural climax community of the peatland is scrub/forest and without grazing or some other form of vegetation control these species can dominate.

24. Overgrazing has largely been a result of farmers responding to policy initiatives leading to intensification by increasing stock numbers. The introduction of the Hill Livestock Compensatory Allowance in the 1970s introduced payments based on stock numbers and further schemes for beef and sheep also in the form of headage payments were introduced in the 1980s. This provided farmers with an incentive to increase stock numbers. It was only with the introduction of the Single Payment Scheme in 2005 that headage payments were removed.

25. The impact of under-grazing has generally been viewed as less significant for upland habitats than over-grazing and the available evidence does not suggest that it is a significant or widespread environmental problem across the English uplands as a whole. However, the Government recognises that there is concern that this may become more of a problem in future in certain areas, and that the situation needs to be monitored. This will allow an assessment to be made of the potential impacts on landscape, access and archaeological remains if vegetation is allowed to grow up and left unchecked, in particular in marginal areas. Locally agreed management regimes can have a useful role to play in helping to define appropriate grazing levels that can balance the needs of farmers, environment and cultural assets.

Water management

26. Government grants in the 1950s and 1960s enabled many areas to be mechanically drained to open more land up for livestock production. Approximately 10,000 hectares of moorland SSSI are in an unfavourable condition due to inappropriate drainage.[11]

27. The main impacts from inappropriate drainage in the uplands are:

— Decline in biodiversity of species on wetter habitats.

— Releases of carbon dioxide.

— Releases of sediment into streams from peat erosion leading to impacts upon aquatic life as well as increases in water treatment costs.

28. The exact amount of peat loss from upland areas is unclear, but it is likely to be at least on the same scale as those from lowland peats, say 0.5-0.9% of UK GHG emissions, or higher due to their larger area.[12] Climate change may also exacerbate the degradation of peat bog as higher temperatures are likely to encourage the decomposition of peat.

29. Upland blanket bogs play a crucial role in water management. Up to 70% of England's drinking water is sourced from the uplands watersheds. Bogs represent a major reservoir of fresh water. Degraded bogs release large quantities of "colour" (dissolved peat) that water companies spend significant amounts of money removing from the drinking water supply. The costs are then passed on to consumers in the form of higher bills. Peat bogs also immobilise huge quantities of legacy pollutants from heavy industry. If the bog degrades, these are released back into the environment.

30. It should be possible to maintain peat bogs in good condition and stop further damage, and farmers have a major role to play here. "Grip blocking" (blocking drains) is, for instance, being supported by Higher Level Stewardship, NGOs, some utility companies and other water catchment schemes. How successful this can be in trying to restore previously degraded land is still unclear.

31. There is also a potential role for uplands in managing flood risk downstream. Healthy bogs for example hold back huge quantities of water whereas degraded bogs tend to release water quickly, which can lead to soil erosion and flash flooding. Retaining water in the uplands therefore could have positive implications for flood risk lower in the catchment. However, there is currently no evidence that peat land restoration can provide catchment wide benefits against the most damaging floods which tend to occur when the ground is already saturated.

Burning

32. Burning is used on heather moorland and acid grasslands and can be successful in promoting heather regeneration. However, if done on too wide a scale or too frequently it can negatively impact upon some species and other ecosystem services such as soil carbon storage and water quality. Burning can also favour some species to the detriment of others. It can also lead to an increase in water pollution through run-off of sediment. Burning on peatland[13] has been used (mostly in Scotland) as a means of improving vegetation for sheep grazing. In England burning of peatland is almost exclusively limited to managing the moorland for grouse. Because of the complexity of burning, localised approaches drawing on sound evidence and expert advice are very important.

Eutrophication and acidification

33. Eutrophication occurs when nutrient enrichment leads to excessive growth of some plant species at the expense of others. These nutrients may come from sources such as atmospheric deposition, and agricultural runoff from artificial fertilisers and animal excreta. Species that have adapted to most upland habitats prefer low nutrient content in the soils and water. The impacts on species that are nutrient intolerant can therefore be high, with serious impacts on biodiversity. Nitrogen compounds can also increase the acidification of soils and water courses (through diffuse pollution from run-off). Since 1998 the pH of soils in the uplands has increased significantly over most of the main habitats although there is not yet evidence of a significant impact on plant species.[14]

ECONOMICS OF UPLAND FARMING

34. Incomes on upland farms, on average, have been consistently lower than for lowland farms. This is mainly due to the uplands having a larger proportion of grazing livestock (ie beef and sheep) farms. These tend to have lower incomes than farm types which occur more commonly in the lowlands, such as dairy, cereals and general cropping farms. The levels of income for grazing livestock farms are in fact very similar between the lowlands and the uplands, as Figure 5, below, shows.

Figure 5

AVERAGE FARM BUSINESS INCOMES FOR SELECTED FARM TYPES (ENGLAND)

Note: The forecasts for 2009-10 are based on information available in early January 2010 for prices, animal populations, marketings, crop areas and yields. They are intended as a broad indication of how each farm type is expected to fare compared with 2008-09 and are therefore subject to revision. Detailed figures for all farm types and dairy farms split between LFA and lowland will be available in November 2010. The average FBI for all dairy farms is projected to fall by around 10% in 2009-10. Incomes for 2009-10 will be published on 28 October 2010.

Source: Farm Business Survey, years ending in February. Farms >0.5 SLR.

35. So the principal issue is less one of the poor viability of upland farming as such, but more one of the economics of grazing livestock farming in general, the farming type which happens to be the most prevalent in the upland environment.

36. There is also a very wide range in incomes across upland farms. For example, in 2008-09, data from the Farm Business Survey in England showed that Farm Business Income on SDA (Severely Disadvantaged) farms in the LFA ranged from an average of—£40 per hectare in the bottom quartile, to £218 per hectare in the top quartile. These income levels include the Single Payment (of about £100 per hectare in these examples). The major factor behind this wide range in economic performance is variation in the level of income from agriculture (as opposed to income from diversification, Single Payment or agri-environment payments).

37. Grazing livestock farming is currently almost always economically unviable without public payments. Figure 6, below, shows the breakdown of income from business activities and subsidy for both lowland and upland grazing farms. Lowland grazing farms share the same difficult economic circumstances, although typically make slightly less of a loss on their agricultural activities and have greater scope for diversification income.

Figure 6

Breakdown of income sources for lowland and upland grazing farms in England for the latest three years. Length of columns indicates the contribution from each source). Farm Business Income shows the gross income from each of these sources, including the contribution of agriculture, which has a negative net margin or income

Source: Farm Business Survey

38. Without support from the Single Payment Scheme and the former Hill Farm Allowance), many upland farmers would, at current (or recent) input and output prices be making a loss on average on their farm business activities.

39. This reliance on public support is demonstrated by an analysis of Farm Business Survey data for 2008-09, which shows that upland farmers received around £163 million from the Single Payment Scheme, £54 million from agri-environment payments and £19½ million from the Hill Farm Allowance scheme (now replaced by Uplands ELS funding of £25 million, depending upon uptake). When adjusted for business size the contribution to farm business income from the Single Payment is around 15% higher on upland farms than those in the lowland. The contribution from agri-environment schemes in addition to the Hill Farm Allowance is almost three times as great.

40. Diversification opportunities are often more limited in the uplands due to the sparse population and, for a number of areas, longer distances to large population centres. Farm Business Survey data highlights that LFA farms have the lowest proportion of diversified activity (41% of LFA grazing livestock farms undertaking some form of diversification in 2007-08, compared to 51% across all farms) and that the contribution of these diversified activities to farm business income was 21%.[15] The Uplands Farm Practice Survey found that more than half (56%) of upland farms had a diversified activity or other income contributing to household income. For almost half of upland farmers this was from an off-farm diversification enterprise or income whilst a quarter of upland farms had an on-farm diversified enterprise such as a farm shop or Bed & Breakfast. The survey highlighted that over half of upland farmers with no current diversified activity felt there was either no scope or they had no plans to diversify, and a further significant group had never thought about diversifying (28% of those with no current on-farm enterprise and 43% of those with no current off farm enterprise or income). There is, however, a greater tendency in the uplands towards supplementing farm income with off farm employment—whether on the part of the farmer or spouse—reducing the time available for further on-farm diversification.

SINGLE PAYMENT RATES IN THE UPLANDS

41. For the purposes of receiving the single payment, England is divided into three regions: English moorland within the Severely Disadvantaged Areas (SDA); English SDA non-moorland; and, English non-SDA. Upland SDAs are disadvantaged relative to non-SDA land in due to a number of factors: higher altitude, harsher climate with a shorter growing season, low soil fertility, difficult topography, and remoteness.

42. When the Single Payment Scheme was introduced in 2005, and following consultation with the farming industry, it was decided that, in order to limit the redistributive effects of the new scheme, the SPS funding within each of the three regions would be kept broadly the same as existed under the old production-linked subsidy schemes. Moorland farms, typically having lower production levels than lowland farms, previously received lower subsidy payments, which the current per hectare payment rate reflects.

43. The 2009 rates per hectare of Single Payment for the three regions are:

— €190.47 for non-SDA.

— €156.09 for upland SDA, other than moorland.

— €27.37 for upland SDA moorland.

AGRI-ENVIRONMENT SCHEMES

44. Agri-environment schemes provide funding to farmers and land managers to farm their land in a way which is sensitive to the environment. Agri-environment scheme payments are based on income forgone and costs of undertaking an activity, as allowed under EU and WTO rules. Until 2005, these were targeted at specific areas or landscape types considered to be of high conservation value, largely through Environmentally Sensitive Areas (ESAs) or the Countryside Stewardship Scheme (CSS). Significant areas (over 400,000ha) of the uplands are still participating in ESA and CSS agreements which gradually expire until 2014. The transition of land under these expiring agreements to Environmental Stewardship (ES) will be key to retaining the environmental benefits and maintaining income levels. At the end of August 2010 national figures suggest that 88% of land under expiring ESA and CS agreements had been transferred to ES. The 2009 Uplands Farm Practices Survey suggested that more than 80% of upland farmers with ESA or CS agreements would be interested in joining another agri-environment scheme.

45. Environmental Stewardship (ES) was introduced in March 2005, providing funding to farmers and land managers throughout England who deliver effective environmental management on their land. There are two levels of management:

Entry Level Stewardship (ELS) and Organic Entry Level Stewardship (OELS) aims to encourage the majority of farmers in England to participate in an agri-environment scheme with a range of simple but effective low cost management options. More recently, a specific uplands strand—Uplands ELS—has been launched, with further details below.

UPLANDS ENTRY LEVEL STEWARDSHIP (UPLAND ELS)

46. The most recently introduced strand of Environmental Stewardship is the new, uplands-focussed, Uplands Entry Level Stewardship. Launched earlier in 2010, the first agreements commenced on 1 July. Uplands ELS is the successor scheme to the Hill Farm Allowance (HFA), which was paid to beef and sheep farmers in England's uplands to compensate them for the additional costs of farming in disadvantaged areas. In 2004, the Government held a review of uplands support, and in 2006 announced the intention to incorporate such support into Environmental Stewardship, with the aim explicitly linking payments to upland farmers with delivery of public benefits, whilst recognising the significant level of such benefits provided by upland farmers. The aim is to secure widespread benefits by encouraging large numbers of upland farmers with land in the SDA to deliver simple yet effective environmental management. In order to smooth the transition for upland farmers from the compensatory support of the HFA to Environmental Stewardship, the HFA was extended into 2010.

47. Uplands ELS is aimed at maintaining and improving the biodiversity, natural resources, landscape and historical value of England's uplands, and to contribute to climate change mitigation and adaptation, by supporting the land management practices which deliver these benefits. It recognises the vital role of upland farmers in maintaining some of the most iconic areas of England, and better targets public funding towards the delivery of environmental and landscape benefits, and is available to all upland farmers (including dairy farmers and those with very small holdings, who were ineligible for HFA).

48. Uplands ELS provides a standard payment every year for five years. Famers have to carry out certain land management requirements and can then choose from over 70 options for farmers, including grassland management, mixed stocking and restoring farm structures such as barns and stone walls. Payments are made at £62/ha, or £23/ha for parcels 15ha or larger above the moorland line. These payments are made at the same rate no matter the size of the holdings: a change from the system under HFA where payments were degressive above a threshold of 350ha.

49. Uplands ELS uptake target is for 80% of Severely Disadvantaged Areas in Uplands ELS by 2015, with an interim target of 505,000ha by March 2011. If this target is achieved, the total spend will be over £25 million per annum.

50. Those upland farmers with land currently in "classic" agri-environment agreements (Countryside Stewardship and Environmentally Sensitive Area schemes) are not able to enter this land into Uplands ELS. To avoid these early adopters of agri-environment being disadvantaged, an Uplands Transitional Payment (UTP) is available to them. The UTP operates along similar lines to the old HFA and is administered by the Rural Payments Agency. Over 2,500 applications have been received for UTP 2011, the first year of this payment. The payment rates are likely to be similar to those under the HFA. As the "classic" agreements come to an end, between now and 2014, those farmers will be encouraged to enter the land into Environmental Stewardship.

51. Farmers' interest in Uplands ELS has been growing rapidly in recent months with more than 3,000 hill farmers and land managers having applied for the scheme, accounting for more than 500,000ha of the uplands. Initial information on uptake of the scheme shows that a wide variety of management options are being chosen by farmers. Popular options range from cattle grazing and grassland management, through hedgerow and stonewall management, to management of archaeological features and maintenance of traditional farm buildings.

52. Uptake of Uplands ELS has been supported by both Natural England and farming bodies, who have carried out events to promote the scheme. Natural England has also contacted all upland farmers to let them know of the move from HFA to Uplands ELS and to encourage them to join the scheme. In addition, the Entry Level Stewardship Training and Information Programme provided support through both group events and 1:1 training for upland farmers to help them understand the scheme.

53. Defra and Natural England are putting in place a monitoring programme to understand the uptake and impacts of Uplands ELS. This will include consideration of environmental outcomes achieved by the scheme and also the impact on farmers' attitudes towards the scheme and land management practices. It will also help us to understand the levels of participation within the upland farmer population.

54. Concerns have been raised about the ability of tenant farmers to access Uplands ELS. Tenants with tenancies of fewer than five years require the countersignature of their landlord on their application. This requirement is the same as for all other strands of Environmental Stewardship, and is designed to guarantee delivery of the full environmental benefits the scheme sets out to achieve and to thereby meet EU requirements. Uplands ELS explicitly recognises the role of the active grazier, whom the Government recognises plays a vital role in delivering the environmental benefits that are being sought. In collaboration with the industry, we have produced specific guidance for tenants and landlords interested in joining Uplands ELS.[16] Defra will be monitoring uptake by tenant farmers as part of the overall monitoring programme for Uplands ELS.

55. Concerns have also been raised in relation to upland commons. Commons agreements require co-operation between the commoners, who (for example) are required to establish and maintain a commoners' association. There is a £5/ha supplement on common land because of the additional cost involved in brokering agreement between the various parties, which may include negotiations with both inactive graziers and the landowner (who in many situations will also have a role to play in moorland management). This supplement brings in significant additional income for the participants—it will be worth an additional £25,000 over the life of an agreement on a 10 km² common. The process for commons joining Uplands ELS has been set out in new guidance published by Natural England,[17] which sets out the steps commoners need to take to map and register their land and to set up their commoners' association and agreement. It is not prescriptive in how a commoners' association should be organised—different structures will be suitable for different situations—but gives guidance on the principles that commoners may wish to consider in setting up their association.

56. So far, around 90 applications have been submitted by commons, covering just under 100,000 hectares of common land. The Government hopes to see this figure increase: we recognise that the application process for new commons may take longer than for individual holdings due to the need to negotiate a joint agreement and also the requirement—where commons are not currently mapped onto the RPA's Rural Land Register—to register the land. However, the Government is keen to see the number of commons increase as they represent an important part of the upland farming landscape and can deliver vital environmental benefits by undertaking management through Uplands ELS. The minimum stocking rate for moorland in Upland ELS is designed to help to address the declining levels of grazing being reported on some upland commons.[18]

HIGHER LEVEL STEWARDSHIP (HLS)

57. Higher Level Stewardship (HLS) is also of considerable importance in the uplands as it provides funding for additional and more complex habitat management in priority areas. Since November 2008, these objectives have been broken down into regional priorities. Natural England has identified 110 target areas, including almost all upland areas, each with their own set of environmental priorities. The priorities for each target area are set out in Target Area Statements. Agreements are sought in each target area that will make the greatest total contribution to the identified environmental priorities for the available resource. As well as the target areas, which cover multiple objectives, Natural England has identified themes which give the priorities for HLS outside the target areas. These themes have been agreed on a regional basis. The theme approach allows those farmers and land managers outside the target areas to focus classic scheme renewals and new HLS applications to meet theme priorities. Moorland and upland rough grazing are the greatest source of expenditure for HLS agreement options in the uplands although there is some regional variation.

58. HLS, CSS and ESAs are disproportionately important as income sources in the uplands compared to lowland areas. In October 2009 (prior to the launch of Uplands ELS), 26% of farmed land in the LFA was in ELS or its organic equivalent. But, overall, around 70% of farmed land in the LFA was under some form of agri-environment scheme with over 40% managed under ESA, CSS or HLS schemes. Nationally around 68% of farmed land is managed under some form of agri-environment scheme with around 58% of farmed land in ELS and only around 9% managed under CSS, ESA or HLS schemes.

Socio-Economic Measures under the RDPE

59. The Rural Development Programme for England (2007-13) implements the EU Rural Development Regulation, which is Pillar 2 of the Common Agricultural Policy (CAP). In addition to funding agri-environment schemes, the Programme provides grant support to improve the competitiveness of the farming and forestry sectors and diversification of the rural economy. The Programme provides support for a wide range of actions, including: modernisation of agricultural holdings; training; innovation; improvement of infrastructure; adding value to products; diversification; and, rural broadband. Opportunities for support provided through the RDPE are available to hill farmers to take up.

60. The RDPE also provides support to rural communities to maintain the quality of life in rural areas, for example through the provision of basic services and engages local communities in decision-making about how the Programme's support is used within the local area through the Leader approach. The Leader approach (also known as Axis 4) is a good example of the Big Society at work and offers an opportunity for local people to become more involved in managing their own affairs, while at the same time capitalising on socio-economic opportunities. A large proportion of upland England is covered by Leader groups to help upland communities to help themselves in a way which is inclusive of upland farmers.

COMMON AGRICULTURAL POLICY (CAP) REFORM

61. The impact of CAP Reform in 2003 has already helped to bring hill sheep numbers more in line with domestic and export market demand. Although breeding sheep numbers have declined, improvements in breeding efficiency by the farming industry have seen no noticeable impact on lamb production levels.

62. Public funding for upland farmers will continue to change in the future as the CAP is reformed further. The UK Government has set out an ambition to make European farming viable without subsidy, and will be seeking deep and lasting reductions in farm income support in the forthcoming negotiations on CAP reform and the EU Budget. While a number of European Governments remain committed to arguing for the retention of farm income support, increasing recognition by Europe's leaders of the budgetary pressures facing the EU mean that the UK stands a better chance than in previous negotiations of achieving its ambitions. Farmers—including those in the uplands—need to recognise that income support from the CAP on the current basis is very unlikely to continue indefinitely, although a realistic transition period is likely to be secured.

63. Research[19] has found that although farmers were aware of approaching CAP reforms, very few were seeking to change their business in advance of this. A "wait and see" approach was common among the farmers interviewed as part of this research project, along with a reluctance to admit that public support could be reduced without increases in returns from livestock farming.

FARMERS' ATTITUDES, PROFILES AND SUCCESSION EXPECTATIONS

64. The Upland Farms Practice Survey asked farmers what they thought were the most important challenges for the future. The most common responses are shown in Table 1.

Table 1

MOST IMPORTANT CHALLENGES FOR THE FUTURE

Most Important Challenge for the Future	% of upland farmers in agreement
Market Prices	76%
Changes to Single Payment	65%
Impact of New Regulations	65%
Input Costs	59%
Level of Environmental Payments	47%
Source: Uplands Farm Practices Survey

65. With market prices often not covering costs of production this is a logical challenge for upland farmers to perceive and want to address. We have also noted that changes to the CAP will make a significant impact upon upland farms. There are other economic factors that are not so much in the immediate consciousness of upland farmers but do have the potential to help improve competitiveness. These are primarily: succession, and education and skills—particularly business planning.

66. The average age of an upland grazing livestock farmer was 57.7 years in 2007 which suggests slow succession rates (although this is an issue for the whole farming industry). Succession is secured on only 37% of upland farms—almost exclusively within the family. This reliance on attracting new entrants to upland farming through the family route is commonplace. For a further 26% of upland farms, succession remained uncertain, and for 27% no succession arrangements were in place. For those with no succession arrangements, the most commonly quoted reasons were: "family do not see the future in farming", "family not interested" and "no family".[20]

67. The Uplands Farm Practice Surveys found that 21% of upland farmers planned to exit the industry within the next five years. Recent research[21] suggests that this figure could be even higher moving towards a long term trend of fewer but larger farms. It also indicates that there will be more frequent changes in ownership and tenure than currently exists. Despite this there is an underlying determination for many upland farmers not to leave the industry (Table 2).

Table 2

FUTURE PLANS OF UPLAND FARMERS

Future Plans	% of upland farmers in agreement
Will do all that they can to remain in farming	41%
Will try to remain in farming	38%
Plan to retire	19%
Thinking of leaving farming for another career	2%
Source: Uplands Farm Practices Survey

68. For those aged over 65, less than a third planned to retire with 37% "planning to do all that they can to remain in farming" and a further 31% "trying to stay in farming."

69. The ability to remain in loss making activity can be supported by strong assets—essentially eating into the asset base of the business in order to survive. The balance sheet for upland farms is strong, even on tenanted farms who record a net worth of 86% of total assets.[22] Borrowing is low on upland farms compared to other farm types. Almost half of upland farmers make no interest payments or actually receive interest payments from off farm investments.

70. The 2007-08 Farm Business Survey found that half of commercial upland farmers had no further or higher education qualifications. Whilst this is somewhat higher than for lowland farmers (37%), it can largely be explained by farm type. A comparison between lowland and uplands for grazing livestock and dairy farms suggests that there is very little difference in their levels of further education or attitudes to skills. When asked about skills gaps, over 70% of grazing livestock farms had not identified any knowledge or skills gaps, compared to just over 60% of dairy farmers.[23]

71. Formal business planning is also low, with only 40% of upland farms having a business plan and under half setting any targets for business or environmental improvements.

Figure 7

PROPORTION OF GRAZING LIVESTOCK FARMERS BY MANAGEMENT ACCOUNTING PRACTICE

Source: Defra, Farm Business Survey 2007-08, Farms >0.5 SLR

72. Fundamental improvements in these management practices along with more flexible and easier succession arrangements and investment in business skills and training would go some way to facilitating an improvement in the competitiveness of upland farms.

LAND ABANDONMENT

73. With marked reductions in stock levels since 2004 and the poor economic viability of upland farming there are anecdotal concerns that land abandonment in the uplands could become widespread and cause environmental problems associated with the absence of grazing.

74. However, there is little current evidence to support this. The land market for upland farms is still buoyant with demand for both farms to buy and tenancies to rent high driven by the determination for many farmers to continue farming. A recent survey shows that there is a "business as usual" approach from farmers in respect of stocking levels: 90% of those grazing the land intend on doing so at the same level over the next two years.[24] As well as the determination of many farmers to remain in farming, participation in agri-environment schemes with minimum stocking densities for moorland should help to retain sustainable grazing levels on moorland.

75. The uplands saw historically lower numbers of sheep in the period prior to the increased intensification of agriculture since the 1970s (see fig.8)--which might suggest that sheep numbers could continue to fall before reduced grazing levels cause more widespread environmental problems associated with under grazing.[25] The important role of sustainable grazing in management of the uplands has already been discussed earlier in this memorandum.

Figure 8

TOTAL SHEEP IN ENGLAND

Sources: June Census/Survey,

FUTURE PROSPECTS FOR UPLAND FARMING

76. Defra's Structural Reform Plan has made the support and development of British farming and the encouragement of sustainable food production one of its three overarching priorities. As part of this, the Government is committed to helping create the right conditions for sustainable farming in the uplands and made a specific commitment to "develop affordable measures of support for hill farmers".

77. Upland farming provides an important combination of environmental, landscape and social benefits alongside agricultural produce. Farming has helped to shape the uplands' landscapes and communities and is also an important source of stock for lowland livestock farming. However, as has already been noted, the economics of upland farming are very challenging and the numerous social and environmental benefits upland farmers provide are not fully rewarded by the market for the livestock goods they produce.

78. Continuation of upland farming, with all the associated benefits to the environment, landscapes and society, will require the economics to become more favourable by one means or another. Upland farmers will need to focus on improving their efficiency and margins, and on making the most of all the income-generating opportunities open to them.

79. Upland farmers will need to have strong business skills and entrepreneurial outlooks. They will need to constantly seek greater efficiencies, cut costs and maximise the income from their livestock enterprises. Actions which some upland farmers have already taken to increase their efficiency include:

— Extending their farms when the opportunities arise to spread fixed costs more widely;

— More extensive herd management that can help reduce unit costs of production;

— Using contractors to reduce cost of permanent staff and equipment;

— Collaborating with neighbours to share resources. Moorskills on Dartmoor, Devon is a good example of farmers pooling resources so that an apprentice can gain the breadth of experience needed for a successful career in hill farming;

— Using nutrient management plans to understand optimal applications rates that help to reduce fertiliser use—and cost—on in-bye land;

— Co-operating with neighbouring commoners through vibrant commoners' associations; and, where a consensus cannot be achieved, commons councils;

— Entering into partnerships with water companies to receive benefits for changing practices to improve water quality;

— Taking advantage of the greater profits to be had from higher-value products, such as by focusing on specialist breeds or finishing stock themselves where facilities exist;

— Ensuring succession plans are in place for those coming into the business, ensuring they have the sufficient skills and knowledge to meet future challenges. Initiatives such as the Fresh Start Academies are a good example of public and private co-operation in succession planning and support and should be utilised by industry; and

— Making full use of business planning tools: management accounting, cash flow forecasts, budgeting, benchmarking etc.

80. Government has a role to play. We will remove barriers and obstacles where we can, such as through the work of the Farming Regulation Task Force. RDPE funding (axis 1) is also available to support farm businesses become more competitive.

81. Livestock production on its own is unlikely ever to be enough to make uplands farms profitable, though for many upland farmers it is the driving force. The Uplands are often seen as areas of disadvantage because of their relatively harsh agricultural and physical conditions and their distances from the facilities and markets of urban population centres and with limited amenities of their own. But these hilly environments and seclusion from urban population centres also make the uplands areas of prized natural assets and a favourite tourism destination. Capitalising on these natural assets presents a business opportunity for hill farmers looking to their wider role as land-managers and stewards of the environmental and landscape benefits they can provide.

82. Agri-environment payments, in particular the new Uplands ELS, are already important for many hill farmers and the Government hopes farmers will make the most of such schemes.

83. Some farmers already take advantage of tourism income by having branched out into new enterprises, such as providing holiday accommodation and farm shops to sell their produce direct to visitors. RDPE funding (axis 3) is available to support farmers to diversify and branch out into new enterprises.

84. Uplands areas are far from homogenous. They differ in terms of geology, geography, climate, biodiversity, livestock breeds, farming traditions and their communities. In line with the Big Society agenda we want to encourage and enable local innovations with local upland farmers and other stakeholders working together to create the best business opportunities from their local assets and markets.

85. As part of a wider statement of Defra's policy priorities for the uplands, we will be setting out our thinking in early 2011 on how a more sustainable future for farming in the uplands can be achieved. We look forward to the contribution of this inquiry to our consideration of this important issue.

October 2010

Annex A

UPLAND HABITAT TYPES AND KEY CHARACTERISTICS

Habitat	Characteristics
Improved Grassland	Sown specifically for agriculture or created by modifying unimproved grassland. Consist of predominant grass species such as rye grass and clover. When not grazed they are often mown regularly for silage production. Biodiversity is lower than in unimproved grasslands.
Neutral Grassland (inc upland hay meadows	Occur on soils with a neutral pH and consist of a diverse range of flora if well managed. Tend to be used as rough grazing for agricultural purposes or hay production. Damaged by nutrient inputs from fertilisers and the change from hay to silage production. More predominance in the North of England.
Acid Grassland	Occurs on acid soils and can be created by overgrazing. Plants tend to be stress tolerating acid grassland species such as bents and fescues making it a relatively species poor habitat.
Dwarf Shrub Heath (heather moorland)	Found on thin mineral and peat soils containing diverse ranges of dwarf shrubs such as heather, bilberry and crowberry with the dominance of these plants varied across different upland areas. There is considerable biodiversity and landscape value.
Calcareous Grassland	Found on shallow lime-rich soils and largely used for rough grazing in agriculture. The type of limestone bedrock will determine the grass and herb species present. Important habitat for invertebrate species. Most common in North Pennines and Lake District.
Broad leafed/mixed woodland	Upland oak woodlands made up of oak and birch are rare and found on acidic soils with a predominance of bryophytes due to the open structure from stock grazing. Mixed ash woodland is also rare and these are found on alkaline, rich soils and support a wide range of flora and fauna. Overgrazing, lack of management, clearance, invasive species (e.g rhododendron) and conifer planting have been blamed for declines since 1940. Current land area relatively stable since 1990.
Blanket Bog	Largest carbon store in England. Plants such as sphagnum moss thrive in these purely rain-fed water-logged conditions and also support a range of species specific to this habitat. Vulnerable to overgrazing, drainage and burning with loss of biodiversity and carbon release.
Coniferous Woodland	More plantations now reaching maturity and being removed and re-planted with more broad-leafed indigenous species (oak, ash etc)
Bracken	Most likely to be found on acid and neutral grasslands and more predominant in Western areas. In favourable growing conditions Bracken can engulf other species reducing biodiversity. Also unpalatable and poisonous to livestock.
Rocky Outcrops	Often inaccessible to livestock so can act as refuges for tall herbs, ferns etc otherwise vulnerable to grazing. Those that are accessible tend to have closely cropped grasses. Includes calaminarian grasslands that were created by lead mining activity
Lakes and ponds	These are nutrient poor systems which have distinctive flora and fauna. They are sensitive to pollutants and eutrophication that can lead to impacts on aquatic biodiversity. Also susceptible to pollution from sediment and livestock manures.
Arable/Horticultural Land	Land deemed suitable for arable or horticultural cultivation.
Built up areas/gardens	South Pennines has the highest concentration of built up areas.