Farming in the Uplands

Written evidence submitted by the National Farmers’ Union (Uplands 16)

1. The NFU represents 55,000 farm businesses in England and Wales involving an estimated 155,000 farmers, managers and partners. Agriculture dominates the uplands. It has created and continues to maintain characteristic cultural landscapes that are highly valued not just for their food production, but also for their high nature value and tourism. Given the critical role played by farming and on the basis of members’ views, we are well placed to comment on the CRC report.

2. CRC’s report recognis es the unique challenges and opportunities uplands areas face. No single policy measure is going to provide the springboard to address the many challenges faced by our uplands. The report, however, does point to the confusing nature of current policies.

3. There is increasing recognition that upland farming provides a number of valuable functions beyond food production, be it biodiversity, carbon sequestration or water management. However, farming is the critical activity from which these other functions will flow. This submission briefly outlines the key issues facing farmers in the uplands and the NFU response to the recommendations outlined in the CRC report "High ground, high potential".

Key issues for farming in the uplands

4. The key issue for many uplands farms is economic survival. As Appendix 1 illustrates, the profitability of grazing livestock farms in the uplands is significantly lower than other farming types. Further analysis of uplands incomes by cost centre identifies that hill farms are reliant on the single payment, agri-environment schemes and the Hill Farm Allowance to be profitable. Based on agriculture alone, many uplands farms would have made a loss in recent years. Just 41% of upland farms covered their costs in 2008/9 based on farming revenues, let alone generated a return on the time and capital invested in their businesses. Not only are hill farm incomes low compared to other sectors, but also when measured against income levels in the wider economy. Average Farm Business income for uplands grazing units in 2008/9 was £17,137 compared to the average per capita pay of £26,470 per annum.

5. That said the overall farm business income of uplands farming has increased. Although still loss making in 2008/9, the agricultural contribution was significantly improved. Detailed data for 2009/10 is not yet available but stronger sheep and beef prices over the last two years will be reflected in agriculture’s improved contribution to farm incomes. Whilst fundamentals such as tighter supplies have impacted prices, factors beyond the control of farming have been key, none more so than exchange rates. Favourable currency shifts have benefited agriculture whereas a stronger pound would place downwards pressure on livestock incomes. Suffice to say that volatility increasingly characterises the prices of agricultural inputs and outputs.

6. Amidst this volatility, farmers must be able to respond to market conditions. As such, agri-environment agreements must be appropriate and flexible. They must facilitate the responsiveness of farmers to market signals and complement productive agriculture. HLS agreements in particular can restrict farmers’ ability to respond to the market.

7. The marginal viability of uplands farms creates succession issues. Although 37% of upland farmers have succession secured, it is questionable for the majority. 21% of upland farms are not expected to continue beyond the next 5 years. We believe that financial uncertainty is critical to determining family members’ decisions to take on and invest in hill farms. This can be amplified by limits to on-farm diversification and a shortage of appropriate accommodation. In addition to the affordability of rural housing, proximity to the farm is key to facilitating the transition of farm businesses to the next generation.

8. Loss of skills and knowledge is another challenge facing the uplands, and is closely linked with succession. It should also be noted that like others in upland communities, access to services and their higher cost are increasingly impacting upland farmers.

9. Despite the challenges, uplands farmers can envisage a future, with comparative advantages when it comes to food production. Consumers increasingly demand provenance from their foods. Grass-fed, traditional livestock rearing systems characterise the uplands. The challenge is to realise this added value and ensure it flows back to farmers. In addition, climate change may further enhance the geographic advantages of the uplands.

10. Combining a more profitable income from farming with other revenue sources is key to farming’s viability. As yet, the markets for public goods are nascent; nonetheless payments for ecosystem services represent an opportunity. Renewables and carbon credits are other areas with the potential to improve viability. However, viable mechanisms must first be developed that are capable of gaining industry confidence and demonstrating that benefits go to those who actively manage the land. In both cases, these offer longer term potential rather than a short term opportunity. In the foreseeable future, income from diversification and agri-environment schemes will remain the critical revenue sources for underpinning farm viability.

11. Beyond direct tourism activities, there needs to be a way of generating income from public access to and provision of some of our most valued landscapes. This challenge cannot be underestimated. Access to mountain hill and moorland made up just 2% of visits to the natural environment in England between March 2009 and February 2010. Moreover, fewer than 3 in 10 visits to the natural environment actually involved any expenditure. [1] Of course the benefits of increased tourism need to be considered against the potential detrimental impact on the landscape (increased traffic, wider footpaths, etc).

Response to specific CRC Recommendations

A new integrated strategy for the uplands

12. This is the second high profile report on the uplands, following Natural England’s 2060 vision. Neither captures a vision for hill farming. The NFU believes that a sustainable upland landscape is founded on farm businesses managing the bulk of the uplands, that are profitable, increasingly productive and able to deliver widespread environmental stewardship. Farming in tandem with their natural and social environment, hill farmers will be increasingly responsive to the signals of the market place. At the same time, they will be able to balance their role as food producers with the need to preserve our unique uplands for subsequent generations. Hill farming will continue to provide opportunity for local communities, visitors and farmers themselves to gain from the multiple benefits that upland ecosystems can sustainably provide.

13. The focus of any strategy needs to consider the short term actions required to address immediate challenges faced in the uplands. In the current climate, we would question the government resources available for developing and implementing a strategy. Inter-departmental conflicts can also be envisaged when it comes to the uplands.

Strengthening leadership and momentum

14. In principle, a single uplands champion has some initial attractions – a focus around a single voice being significant. However, experience suggests that the diversity of the English uplands and the range of communities present means a single champion model is unlikely to be appropriate. Successful advocates need an attentive audience amongst decision makers. We believe that a more promising model may be that of an uplands panel drawn from business and social communities across England with a sponsoring Minister (the Hill Farming Advisory Committee provided such a role before its abolition). Such a forum would draw on a wider breadth of knowledge, indicate the seriousness of uplands issues, and would be more adept at dealing with any conflicts that arise given the multiple needs of uplands communities.

Empowering communities in the uplands

15. The emergence of local enterprise partnerships (LEPs) could offer a solution for the uplands, based on some of the policy weaknesses that the report has identified e.g. one size fits all approach, non-participatory, etc. Empowering upland communities for more direct input seems to fit within the localism agenda of developing a bottom-up approach to management of our uplands. However, few LEPs have highlighted agriculture as a priority to date and there is significant uncertainty over their future role. Specific issues to consider include:

· Will central government and especially locally based regulators delegate the appropriate functions and what is the safety net if local empowerment falls short?

· Does this facilitate fragmentation of uplands policy into a myriad of local initiatives, conflicting with calls for stronger leadership?

· Are the skills and knowledge in place, particularly if devolved to the parish level as suggested by CRC and especially amongst upland businesses, which must devote time to manage local partnerships?

· In participatory budgeting, will the expectations of residents be aligned with the needs of business in a locality? Whilst residents may be inclined to adopt a ‘drawbridge mentality’, many businesses are reliant on national or international supply chains for resources and markets.

16. A particular concern for agriculture relates to community-led planning. Planning policies designed to maintain the appearance of the uplands rather than develop the productive infrastructure of agriculture in the uplands risk undermining efforts to improve economic viability.

A new approach to funding (a better targeted CAP)

17. A detailed consideration of CAP reform is perhaps better suited to subsequent EFRA inquiries. Suffice to say that the NFU maintains the view that the case for a twin pillar CAP is convincing (as opposed to a single pillar approach which CRC appears to promote), with clear roles for both parts of the CAP. Our vision is for Pillar 1 Single Payments to provide income stability and ensure the productive and sustainable use of the countryside. Pillar 2 provides complementary aids to promote innovation, competitiveness and reward public good provision. CAP is fundamentally an economic policy and until functioning markets and volatility are eliminated, there is a compelling case for ongoing income support. Indeed, the leaked CAP communication from the European Commission indicates additional income support for farmers facing specific natural handicaps in the form of direct payments, and support for LFAs under the 2nd pillar coming to an end.

18. While we disagree about CAP policy structures , the CRC is correct to raise the issue of income foregone in the context of calculating agri-environment payments. It is a crude measure of public value . I n many situations (not just the uplands) farmers ’ agri-environment measures yield multiple benefits for which payment is calculated only on the theoretical foregone production. T he complex methodology involved does not promote innovation in environmental delivery and performance. A different approach is required to enable agri-environmental payments to offer real and consistent incentives to farmers and to take account of the benefits delivered rather than the income foregone.

19. In relation to rural development, the NFU has questioned the effectiveness of axes 3 & 4. It has been suggested that such objectives could be better served under DG Regio policies that are more suited to long-term, social and community objectives.

20. In relation to agri-environment schemes, upland land tenure patterns provide some unusual challenges. About half the English uplands is rented (a higher proportion than the lowlands) with much of this land on private shared grazing tenancies (termed ‘gates’ or ‘stints’ of less than 5 years duration) and a large area of commonland on which graziers share their grazing rights. In such situations without consensus of view (commonland) or agreement of the landlord (rented land) the grazier can be excluded from agreements. In such situations, it is the land owner rather than the active farmer who benefits from the support mechanism. It is with this unique tenure in mind that we call for a prompt and continuing review of the uptake and beneficiaries of the Upland ELS scheme (see paragraph 23).

21. For axis 1 measures, the barriers and uptake issues are certainly not unique to the uplands. In fact, the uplands can benefit from additional aid intensity. However, from a match-funding perspective, it seems logical that upland farms could face challenges in obtaining the private funding element, given they tend to be amongst those that have the lowest incomes. It would be sensible if the current mid-term review of RDPE takes account of issues relating specifically to uptake in the uplands.

Developing markets for carbon and water

22. The NFU welcomes development of such markets. However, the prospect of such markets providing a meaningful income source for farmers remains distant, especially with a low carbon price for stored and sequestered carbon and water companies only recently permitted to enter into agreements to improve water quality through land management measures. Government resources and budget to develop and implement new policy areas must be questioned, although public-private partnership offers a solution.

Securing the future for hill farmers

23. Initial uptake levels of UELS appear encouraging. Defra will be regularly monitoring uptake but a formal review sooner rather than later seems appropriate. However, it is critical that this evaluates the extent to which former HFA recipients are being captured by the new scheme, particularly given the marginal viability of many hill farms. As noted previously, land tenure can impact eligibility of payments. Given the higher proportion of tenants in the uplands, use of common land and short term grazing lets, specific research on who receives UELS payments should be included in this review.

24. We would support greater reflection of what is happening on the ground. Given differences in land characteristics across regions, national guidance is a blunt instrument. However, decisions must be taken for the longer term, evolving rather than taking excessive, over-reactive measures. They must also engage local farmers.

25. With succession a fundamental concern, we welcome the opportunity to address this issue. Ultimately, succession can only be guaranteed when financially viable farming businesses and new entrants combine. Whilst the profitability of uplands farms remains marginal, encouraging new entrants and succession will remain a challenge. Planning policy can help, supporting affordable developments on-farm and not in nearby towns or villages.

26. To support skills development, a long-term and collaborative plan for research and knowledge transfer is vital. Including colleges and demonstration farms as part of this collective resource is sensible. Given local differences across the uplands, the involvement of more than one college would be prudent and support provision of extension services.

Encouraging enterprise in new green growth areas

27. An audit of renewable energy opportunities is a solid start, but needs to go beyond an audit to look at effective policy measures to promote it (including advice that is tailored to rural and uplands businesses). On the surface, this appears an area for potential conflict at government department and community levels. Leadership and central guidance is necessary to ensure this is effective. The availability of new resources within government to support green growth should also be questioned.

Raising aspirations: supporting the development of communities

28. Similar to the above, is it realistic that BIS will be able to provide additional, more specialised support at a time when government services are set to be trimmed? It is more likely that this is conducted on a voluntary basis, or perhaps this is an area where public-private partnerships could fill the gap likely to result from the spending review. As both the big society and localism agendas develop, differences between uplands/rural needs and urban areas cannot be ignored. For example, the Regional Growth Fund already looks likely to have a minimum threshold of £1m for applications, and could exclude upland communities from the fund. Similarly, lower population densities could prove a deterrent to communities fulfilling localism opportunities.

Improving broadband and mobile telephone communications

29. This needs collaboration with BT to identify areas that are likely to get left behind as the telecoms infrastructure is improved. This is undoubtedly an area with potential for public-private partnership given that spending restraints may limit government involvement.

Planning to enable sustainable upland communities

30. Planning is a key issue, facilitating continued development of on-farm infrastructure and succession. As noted previously, proximity to the farm of low-cost housing is critical to facilitating the effective transition to the next generation. Although details relating to the Coalition Government’s Home on the Farm [2] initiative have yet to emerge, we are encouraged that this approach has the potential to support farm succession.

31. The challenge is to ensure a joined up approach to planning that allows for local tailoring, but without becoming a means for local residents to block any undesired development regardless of its wider benefits. In terms of the wider uplands challenges, provision of low cost housing solves one of the challenges. There must be economic opportunity as well. People will only remain in the area if there is employment too, so development must be integrated. The situation is further complicated given that National Parks cover a proportion of our uplands. Whilst they seek to conserve our National Parks, they are also statutory planning authorities, creating potential tensions. Uplands landscapes and rural communities must be recognised as dynamic, and planning regulation needs to reflect this. Perhaps a national planning strategy could reflect the needs of the uplands.

Appendix 1: Farm Business Income data for farms in Less Favoured Areas

October 2010