Environmental Land Management Scheme

This is a House of Commons Committee report, with recommendations to government. The Government has two months to respond.

Thirty-First Report of Session 2021–22

Author: Committee of Public Accounts

Related inquiry: Environmental Land Management Scheme

Date Published: 9 January 2022

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For more than 40 years, the farming sector has been supported by subsidies through the European Union’s Common Agricultural Policy (CAP). English farmers receive around £2.4 billion annually. In recent years, around four-fifths of this was provided as direct payments based primarily on the amount of land farmed. Following the UK’s exit from the EU, the Department for Environment, Food & Rural Affairs (the Department) is introducing the Future Farming and Countryside Programme, which will focus on improving the environment, protecting the countryside, improving the productivity of the farming sector and improving animal health and welfare. The Department plans to reduce the amount of money provided to farmers through direct payments each year from 2021 and remove them entirely by 2027. The resulting funds will be used to provide environmental benefits instead. The Environmental Land Management (ELM) scheme is the most significant of the new schemes being introduced.

The scheme will have significant implications for the farming sector. Over a third of farmers would have made a loss over the last three years without direct payments. It is also a crucial part of the Department’s plans to achieve the wider environmental objectives of the government’s 25-Year Environment Plan and to meet government’s net zero target by 2050. ELM will pay farmers for actions to improve the environment. It will consist of three components, each of which is planned for full launch in 2024. In the meantime, the first component, the Sustainable Farming Incentive (SFI), is being piloted in 2021 and the Department plans to begin roll-out in 2022. This initial roll-out of SFI is intended to allow farmers to start earning income for providing environmental benefits as the current system of direct payments start to be phased out. Farmers and other landowners will also have access to other schemes funded by the removal of direct payments, including programmes focussed on promoting productivity such as the Farm Resilience Scheme.

Conclusions and recommendations

1. The Department is over-optimistic about what it will be able to achieve by when, resulting in repeated delays and uncertainty over the delivery timetable for ELM. The decision to reduce direct payments to farmers and to introduce a new system of payments that incentivise environmental outcomes was made soon after the 2016 referendum on EU membership. The release of further information on what this entails has been very slow, with internal milestones subject to repeated delay. For example, in order to manage delivery risks, the Department scaled back the scope of the initial roll-out of SFI significantly compared with what was announced in November 2020. The Department’s timetable for introducing the new scheme is challenging and it has failed to deliver on many of its key milestones, including the announcement of payment rates under ELM, which was initially scheduled for June 2020. The Department has no detailed plans beyond March 2022 and has not carried out a full assessment of whether it will be ready in time to launch the initial SFI roll-out as planned.

Recommendation: The Department should report to the Committee early in 2022, and annually thereafter, with an assessment of the deliverability of its plans for farming. This should include both the elements to be rolled out in the short term, and longer-term plans for the overall approach to land management in England.

2. The Department has not established the metrics that it will need to determine whether ELM is contributing towards the government’s environmental goals. The Department has set out its high-level vision for ELM, which is to secure a range of positive environmental benefits and to help tackle some of the environmental challenges associated with agriculture. But it does not yet have detailed objectives for achieving this vision. The Department has committed to publishing these before Christmas, alongside details of the initial roll-out of SFI. However, the objectives will only apply to the current Parliament and will not include ELM’s contributions to long-term objectives, such as to net-zero. The Department is unable to explain how it intends to assess progress against environmental baselines, or even whether these baseline measures exist. In the early stages of ELM, the Department will award payments based on the amount of land on which specified environmental actions are being carried out, not on measuring the environmental benefits delivered through these actions. The Department expects that, for later elements, such as peatland restoration, it will be in a position to make greater use of baseline data.

Recommendation: The Department should develop clear metrics, and establish robust baseline measures, to allow it to assess the operational effectiveness of ELM and ensure these are published before the start of roll-out in 2022. It should report against these metrics annually to enable Parliament and the public to determine what progress it is making towards meeting the objectives set out in the Government’s 25 Year Environment Plan.

3. We are not convinced that the Department sufficiently understands how its environmental and productivity ambitions will impact the food and farming sector over the next decade. Farmers will be required to free up land currently used for food production to produce environmental benefits, for example converting farmland to forestry. This may result in an increase in food imports and possibly the price of food into the UK, potentially exporting the UK’s environmental impacts through food being produced in other countries where environmental standards are lower. The Department asserts that environmental benefits can be delivered alongside improvements in farm productivity, and that these improvements will mean that, despite taking land out of production to deliver environmental benefits, farmers can produce more food from the remaining land. The Department also points to productivity improvements as helping to offset farmers’ loss of direct payments but has not presented evidence to support this. Smaller farms and tenant farmers are particularly exposed as they are more reliant on direct payments, which may lead to some going out of business resulting in larger agricultural holding sizes.

Recommendation: The Department should urgently explain to the Committee, showing its forecasts both for changes in land use and resulting changes in payments to farmers, how it expects its farming programmes to affect food production and farm productivity in England and report annually to Parliament on the level of food price inflation together with any changes to the proportion of the food we consume that is produced in the UK, which was 53% in 2018.1

4. Despite committing to delaying the early stages of SFI if either the Department or farmers were not ready, the Department has not specified what would trigger such a delay. Opinion within the farming sector is divided over whether the Department’s timetable is realistic or whether delaying the start of roll-out of the programme from 2022 is desirable. Some believe a delay is necessary to ensure that the scheme delivers for farmers and the environment and that farmers have the time they need to plan their businesses. The Tenant Farmers Association reminded us that farming requires long-term business planning, with crop rotations and breeding programmes put together over many years. But others highlight that progress to date has already been too slow, and that the right time to delay was 12 months ago. The Department acknowledges that there are delivery risks in the early stages and that it has yet to develop detailed delivery plans beyond March 2022. The Department has committed to making the first payments by Christmas 2022, and to not implementing any system changes that may put this timetable at risk. It asserts that, while there are risks to the delivery timetable that it needs to manage, it is on track and there is currently no need to delay. It told us it carries out reviews to identify any ‘red flags’ that may indicate the need for a delay due to the Department not being in a position to deliver the system, or farmers not being ready, but has not specified what these red flags are or the circumstances that would lead to a delay. Announcing a delay at short notice could be very damaging to farmers’ confidence in the scheme.

Recommendation: In line with its Treasury Minute response, the Department should write to us by the end of February 2022 to confirm how it is assuring its own and farmers’ readiness at each stage of the Programme, and specify what would trigger a delay and when, allowing sufficient lead time to allow farmers to plan for a delayed launch. In the meanwhile, it should inform the Committee immediately if any issues with the timetable arise.

5. The Department has not yet done enough to gain farmers’ trust in its ability to successfully deliver the programme. Farmers’ confidence in the Department was severely damaged by a poor history of delivery under previous agricultural subsidy schemes, and the situation has not been helped by the very slow release of information relating to the new schemes: In December 2021, since our evidence session, the Department has published further information on how the Sustainable Farming Incentive will work in 2022, including payment rates for the first phase. However, farmers still lack detailed information on what Defra has planned for 2023 and 2024. The Department’s last-minute approach to providing information to farmers severely undermines their ability to plan for the long term to make sure their businesses are sustainable. Arrangements for the upcoming pilot were originally planned to be released a month and a half ahead of inviting expressions of interest, but were released with just two weeks’ notice. We are particularly concerned that the lack of information on what would be available to encourage young farmers into the industry means that young farmers will be less able to enter the industry. The Department admits its confidence in the scheme looks like blind optimism without the details of what it has planned, and has committed to providing, in Spring 2022, this detail for the Scheme’s roll-out in 2023 and 2024. In October 2020, the Department reported that only 30% of farmers had all or most of the information they needed to inform business planning and, although this figure had improved to 40% by April 2021, it is still alarmingly low. A separate survey carried out by the RPA from January to March 2021 found that only 4% of respondents were ‘very prepared’ for upcoming changes in farming and 37% ‘not at all prepared’. Worryingly, 41% of respondents to that survey said they did not know what SFI was. The Department released additional information in June 2021 which may have further improved farmers’ readiness, but the Department has not checked whether this is the case. The Department is seeking to improve its engagement with farmers, but was unable to provide us with details on how it will measure the success of its engagement.

Recommendation: The Department should review its entire communications strategy and report to us by the end of March 2022 on the improvements it is making.

The Department should also set out how it will incentivise young farmers both to enter, and to remain, in the industry.

6. The Department is not doing enough to support farmers through the transition to the new schemes and alleviate any anxiety its plans are causing. The removal of direct payments would have reduced the average net profit of farms in England by 53% over the last three years to only £22,800. Without direct payments, over a third of farms would have made a loss and so be unsustainable as businesses if nothing else changed, such as income from new schemes or rent reductions. The Department asserts that farmers will be able to offset the loss of income from direct payments through improvements in productivity, alternative income streams and support from its schemes. The Department recognises that the changes it is introducing is causing farmers anxiety. The mental health of farmers is one of the biggest challenges currently facing the sector. While the Department works with farming charities and is introducing the Farming Resilience Fund, the focus of this is on providing business support and advice to handle changes, rather than directly supporting the mental health of farmers. The Rural Payments Agency, which is responsible for administering payments to farmers, has committed to developing a ‘here to help’ relationship with farmers, but this could be hindered by ongoing trust issues.

Recommendation: The Department should identify what further support is needed to help farmers during the transition, including where farmers will face significant business challenges in the short term. The Department should particularly set out what it will do to support farmer’s well-being through the transition.

7. We are concerned that ELM will be too complex and bureaucratic, and will not cater for the full range of farm types and circumstances. The Department has used a process of ‘co-design’ to develop the scheme, working closely with both stakeholders and a panel of farmers. Stakeholders describe feeling very engaged, but are concerned that the Department is confusing activity for progress in the scheme’s design. Even though the scheme is due to launch soon, organisations are struggling to support their members in understanding how they will be able to access the scheme and what provisions are being made for specific groups, such as tenant farmers. But farmers participating in the pilot report a lack of flexibility in the design of ELM, that they find the guidance very confusing, and that it is still not clear what they need to do to receive payment. There is a risk that small farmers will find any excessive bureaucracy especially challenging, so it is a particular concern that they are under-represented in the pilot. Only 30% of farms participating in the pilot are under 50 hectares compared to 61% of English farm businesses as a whole.

Recommendation: The Department should urgently write to the Committee by the end of January 2022 to explain how it is using the current pilot of SFI to get feedback on the complexity of ELM, especially for smaller farm businesses and tenant farmers, and what changes it will make to alleviate any perceived complexity.

1 Progress in designing and introducing the scheme

1. On the basis of a report by the Comptroller and Auditor General, we took evidence from the Department for Environment, Food & Rural Affairs (the Department) and the Rural Payments Agency.2 We also took evidence from the National Farmers’ Union, the Tenant Farmers Association, the Royal Society for the Protection of Birds, the Confederation of Forest Industries, and the University of Kent.

2. The UK farming industry provides more than half of the food we eat and employs 472,000 people in the UK. The industry comprises around 200,000 farm holdings, which use 17.3 million hectares, almost three-quarters (71%) of the land in the UK. For more than 40 years, most UK farmers have benefited from subsidies through the European Union’s Common Agricultural Policy (CAP). Under CAP, English farmers received around £2.4 billion annually and, in recent years, approximately 80% of this has been distributed through the Basic Payments Scheme (BPS), which provided direct payments to farmers. Many farmers are reliant on this to maintain their businesses. BPS delivers some environmental benefits through limited compliance requirements but is largely based on the area of land farmed.3 Reports from past committees have examined a long history of challenges in the Department’s management of schemes supporting the agricultural sector, such as the significant delays in payments to farmers during the CAP Delivery Programme, which had in turn been established to address failures in earlier approaches to the scheme.4

3. Following the UK’s exit from the EU, the Department is introducing the Future Farming and Countryside Programme, which is intended to reset the post-war and post-CAP settlement for agriculture by focusing on improving the environment, protecting the countryside, improving the productivity of the farming sector and improving animal health and welfare. The Environmental Land Management (ELM) scheme is the most significant of the new schemes being introduced in England. The Department’s vision for ELM is based on delivering the six outcomes set out in the 25-year Environment Plan. These include specific environmental goals such as clean air, and more general ambitions such as ‘using resources from nature more sustainably and efficiently’.5 In order to fund the new programme, the Department is phasing out direct payments in England over seven years starting in 2021, with resources redirected to the new schemes. The Government has committed to maintaining current average levels of spending on farming of £2.4 billion per year in England over the life of this Parliament.6

8. The ELM scheme consists of three components:

  • The Sustainable Farming Incentive (SFI), which will pay farmers for actions to manage their land in an environmentally sustainable way;
  • Local Nature Recovery, which will pay farmers for more complex actions that deliver benefits at a local level and encourage collaboration between farmers;
  • Landscape Recovery, which will support large-scale projects to deliver landscape and ecosystem recovery through long-term land-use change projects.

4. The Department plans to launch all three components in full in 2024, following a series of pilots. The first of these, for SFI, started in 2021. The Department also plans to roll out elements of SFI ahead of the full launch, with the first of these due to be made available to all farmers currently receiving direct payments in 2022 (referred to here as SFI22).7

Progress to date

5. The Department first set out its intention to radically overhaul the farming industry in England in the ‘Health and Harmony’ consultation in February 2018. This proposed a period of agricultural transition during which direct payments would be reduced, to be followed by a new environmental land management system underpinned by payment of public money to farmers and land managers for the provision of public goods.8 This wholesale overhaul is ambitious, and the detail behind it is being developed at a slower pace than originally planned and Defra has failed to deliver on many of its key milestones. For example, the Department originally hoped to have agreed payment rates for the new scheme by June 2020, but these were not included in the Agricultural Transition Plan published in November 2020.9 Similarly, the Department’s internal timetable for the start of a farmer awareness raising campaign ahead of the 2021 SFI pilot shifted from November 2020 to March 2021.10 The National Farmers’ Union described the Department’s current position as being a skeleton framework, with the exact detail of what farmers will need to deliver changing day by day. It told us that this suggested that the programme was still in a development phase, rather than ready for the planned roll-out starting next year. The Tenant Farmers Association similarly told us that the Department’s timetable was achievable but extremely challenging, provided “some fairly foundational issues” were addressed.11

6. The NAO reported that, when the Department published its consultation document in February 2018, there was no intention at that time to give farmers access to any scheme that would provide them with the opportunity to replace income lost through the loss of direct payments until 2024. Given the long-planned phasing out of direct payments the NAO found it surprising that SFI22 was only agreed by ministers in September 2020, two and a half years later.12 The Farming Forum Grassroots Group, in written evidence, agreed: “it is disappointing but not surprising that Defra belatedly realised in 2020 that their original plan for transitioning to ELM seriously risked triggering an avalanche of bankruptcies in agriculture which had widely become dependent on [direct payments] for basic profitability.”13

7. Delivery of the programme has been substantially affected by COVID-19. The Department told us that, between April and September 2020, it had temporarily moved staff from the programme to food resilience and food for the vulnerable from April to September 2020.14 This meant that staffing levels for the programme in October and November 2020 were equivalent to only 55% of the Department’s estimated requirement. The National Audit Office (NAO) reported that in April 2020 Defra officials asked ministers for a six-month delay to the start of the pilot because of delivery concerns, and for a smaller initial reduction in direct payments. However, ministers asked Defra to stick to existing plans. Defra established a revised approach to the pilot, including deferring the start of Local Nature Recovery and Landscape Recovery, in July 2020. The NAO also found that the Department had ongoing issues with skills gaps, particularly in programme and project management, business analysis and digital skills.15 The Department originally planned to conduct a skills audit in February 2021, but this was not completed until the Autumn. The Department told us that the resourcing and skills position for the programme had now improved. It explained that it expected to fill the final vacancies, for experts in service delivery, by the end of the year, and did not expect the remaining vacancies or skills shortages to impact delivery.16

8. In January 2020, the Department selected five of its arm’s-length bodies – the Rural Payments Agency, the Environment Agency, the Forestry Commission, Natural England and the Joint Nature Conservation Committee - as delivery partners for the pilot and SFI from 2022 to 2024. Yet by September 2021, over a year and a half after being selected, none of the delivery partners had a formal agreement governing their role. The NAO found that this had led to uncertainty about the activities the delivery partners are expected to undertake, how many staff they need to commit to the work and how much funding they will receive from the Department.17 The Rural Payments Agency told us that the situation had improved considerably, and that it was now much more involved in the design of the scheme than earlier in the year. However it also said that it still did not have a full picture of the resourcing it would require for next year, and that it had needed to make assumptions about the likely levels of take-up for the scheme.18 We asked the Department what it was doing to improve delivery partners’ understanding of what their role was. The Department told us that its engagement with its delivery partners had improved and it was now “genuinely embedding” their expertise into the programme. The Department asserted that embedding its arm’s-length bodies into the programme through ‘virtual teams’ removed the need for a Memorandum of Understanding or similar agreement to govern the relationship. However, it committed to looking at whether more formality was required for its engagement with the Environment Agency or Natural England.19

Achievability of the timetable

9. The Department has committed to making the first payments under SFI22 by Christmas 2022. Despite the tight timescales and continuing uncertainty around the launch of SFI22 next year, the stakeholders we heard from were divided on whether a delay to the roll-out and to the reduction in direct payments was necessary. The National Farmers’ Union recommended a delay to ensure that the scheme is ready to work for both farmers and the environment. In its written evidence it said: “The NFU does not believe that Defra should press ahead with its current timetable to transition when its new agriculture support schemes simply aren’t ready. Direct payments should only be phased out when there are fully funded accessible new schemes ready for farmers to apply for.”20 The Confederation of Forest Industries similarly told us that a slight delay would be helpful in ensuring that necessary consultations about change and transformation in the way land is used in the UK were complete.21

10. In contrast, the RSPB told us that there had already been a lot of unnecessary delay to the roll-out of the scheme so far, which added to the urgency of getting the scheme right quickly. It explained that the roll-out of SFI22 needed to make sure it was sending a clear signal as to the direction of travel. The Tenant Farmers Association highlighted that it asked for a delay 12 months ago but no longer thought that now was the right time for it. It instead said it was important that the scheme moved forward and that the Department ensured that there was communication over scheme details, payment rates and how the Department and the Rural Payments Agency, which is responsible for administering payments, are going to deliver the scheme for farmers.22 The Wildlife and Countryside Link, in its written evidence, also told us that, “despite challenges, there must not be a delay in the design, communication and roll-out of Environmental Land Management”. It explained that this was important to minimise the risk that Government will fail to meet its environmental objectives, and also to lessen the risk of disenfranchisement from farmers and land managers that could result from delaying.23

11. Given the serious problems the Committee has reported on previous agricultural payment schemes, and the impacts of COVID-19, we asked the Department whether it had considered a delay, and whether its timetable for delivering SFI22 included any contingency to allow this as some stakeholders had asked. The Department assured us that it would “make sure there is not a problem” and it would not launch a scheme that was going to be a “delivery car crash”.24 It told us that its main contingency was to ensure that it was delivering things that worked was through its testing process and that it undertook “continuous and regular reviews” which had been “really helpful in moving us along to make us most likely to be successful”.25 The Department confirmed that it would not introduce something that it had not tested and that it was managing the scheme to ensure that elements such as IT changes were only implemented if they did not put the Christmas 2022 deadline at risk. It confirmed that it could push back the deadline if its reviews raised a red flag for delivery of the scheme, but that this had not yet been the case. Its current view of the risks to delivery was that a delay was not necessary as, while there were risks for it to manage, it was on track. It recognised, however, that if its reviews showed that either it was not in a position to deliver SFI22 as planned, or to make payments ahead of Christmas, or if it was clear that farmers, having seen the final details of the scheme, were not ready “to engage with the scheme”, this would “raise a question about what the contingency is”.26

12. The NAO found that Department does not have detailed delivery plans for the programme beyond March 2022, and has not carried out an overall assessment to demonstrate that SFI22 is deliverable.27 The Department told us that its current assessment was that it would be able to deliver to the timeframes it had set out and that farmers would be ready to join the scheme and deliver what was required of them. It accepted that, if either of those were to change it would have to think again, and that it was “pragmatic in that respect”, but that there was nothing in its current assessment that suggested it could not proceed with the timetable as planned.28 We urged the Department to be cautious and to undertake any contingency planning that it could in order to avoid the scheme negatively impacting on farmers as they transition into it, and asked it to let us know as soon as it was aware of any issues.29

2 Engagement with stakeholders

13. The Department for Environment, Food & Rural Affairs has a history of failure when developing systems to support subsidy payments for farmers, and this history means that it is starting with a low level of trust from the sector.30 In 2016, the previous Committee examined the Department’s delivery of new systems and processes to support the implementation of the Common Agricultural Policy, which was itself intended to address past failures. It found that this has been unsuccessful in many respects, and that repeated failures in the delivery of the CAP meant that payments to farmers had been delayed at a time when their cashflow was already stretched.31 The previous Committee examined the programme again in 2017 and found that the extent of the Rural Payments Agency’s (the RPA’s) failure to pay farmers in England on time and in full was clear. The RPA paid only 38% of farmers on 1 December 2015, the first day when payments could be made, compared to 90% in previous years. By the end of March 2016, 16% of farmers still had not received any payment. It concluded that in addition to the RPA being unable to pay farmers the money they were due on time, the Department had not assessed the impact of this on farmers and the rural community.32 The Department recognised that the trust of farmers would be critical to the success of its new schemes.33

Designing the scheme with farmers

14. The Department is developing the ELM scheme through a system of ‘co-design’, which they have now started to refer to as “co-creation”. This is working collaboratively with farmers and others to obtain continuous feedback and input as they iterate the design of the programme.34 Both the National Farmers’ Union and the Tenant Farmers Association told us that they felt very engaged in the process, but both also raised concerns about the effectiveness of the Department’s approach. The National Farmers’ Union highlighted the importance of ensuring that farmers’ first engagement with the scheme in 2022 is a positive one, to keep them engaged into the future. It told us that it did not feel that there was a co-ordinated approach to the scheme’s development and that co-design process was creating “a little bit of chaos”, explaining that “everyone is chipping in, and nobody really knows exactly where scheme design is getting to”.35 It described Defra’s approach to co-design as “scatter-gun” and asserted that co-design cannot replace consultation, and that the Department’s plans were lacking in detail, particularly around the later components of the scheme, Local Nature Recovery and Landscape Recovery.36 The Tenant Farmers Association felt that it was inputting heavily into the design but, as it was not seeing specific details from the Department, it could not support its members in understanding what is planned. It also told us that, due to the focus on the co-design strategy, the Department was mistaking activity for progress in the scheme design.37 In addition to engaging with farming organisations on co-designing the scheme, the Department told us that it was working closely with a panel of 1,000 farmers, although we highlighted that this is only a small proportion of farmers in the country.38 In written evidence, the RSPB said: “we are keen for Ministers to bring to life what they want and need this policy to deliver. We believe this could enable farmers to plan and succeed, whilst also providing a constructive context to help improve the co-design process.”39

15. An important test of whether the Department’s approach will be successful is the pilot for SFI, for which applications opened in July 2021. The SFI pilot will test how farmers respond to the scheme’s design and systems, the approach to farm inspections and compliance, and ease of use of current systems and technical guidance.40 The Department told us that 938 farmers had applied to join the pilot, in line with its target of around 1,000 participants out of 218,000 farm holdings,41 and that this included good representation of different types, sizes and location of farms.42 It also told us that these participation rates were a sign that the SFI offer was attractive to small farmers and tenant farmers.43 The Department wrote to us after our evidence session to explain that, of those taking part in the pilot, 22% were tenant farmers. This is in line with the proportion of the farming sector they represent at 26%.44 However the data also showed that 30% (283) of pilot participants were on farms under 50 hectares.45 In comparison, published data show that more than double this (61%) of English farm businesses as a whole are below 50 hectares.46 The Department committed to providing us with a breakdown of the pilot participants, including the different geographies represented, but its letter did not include this analysis so we do not yet know how representative the pilot is in terms of farm location.47

16. The Tenant Farmers Association told us that its members participating in the pilot were finding the scheme guidance confusing, with an onus on farmers to decide what they think is best to enable the delivery of public goods.48 The National Farmers’ Union told us that it had received similar feedback from farmers that the scheme felt complicated and very prescriptive, and that it expected farmers to find delivering the scheme very challenging. It also highlighted that some pilot participants were taking part to learn what the scheme looked like, rather than because of the incentives to participate. The National Farmers’ Union also told us that the current incentives will not be seen favourably by farm businesses that use intensive practices, and that it will not make sense for these farms to go into the scheme.49 We noted that some of the Department’s past schemes have been complicated and asked what it was doing to ensure that ELM is user-friendly. The Department told us that it was taking on board feedback about what works and does not work to try to ensure that the scheme is “as accessible as possible”.50 The Department and RPA told us that they were working on the system for SFI22 including a new front end to make it more accessible and user friendly, but had not yet decided whether it will use the new front end or revert to the existing countryside stewardship system.51

Impacts on farmers

17. As part of the new scheme, direct payments to farmers will reduce by 55% by 2024–25 before being phased out completely. The NAO found that the Department expects the reduction in direct payments and introduction of its replacement arrangements to have a significant impact on profits for many farmers. Analysis of the Farm Business Survey shows that many farmers are reliant on direct payments to support their business. Without direct payments, and with no other changes (such as income from new schemes or rent reductions), the average farm in England would have an annual net profit to the farmer of only £22,800, a fall of 53% compared to their average profit for previous years. Over a third (38%) of farmers would make a loss without direct payments.52 The Department asserted that farmers can manage the impact of these reductions through a range of business improvements. It expected that this would include both increasing income, such as through participation in schemes and other approaches such as diversification or exports, and reducing costs through improving productivity and reducing waste.53

18. We asked the Department what farmers were feeling about the new scheme and the reduction in direct payments. The Department recognised that while some saw the scheme as a “welcome opportunity to embrace a new future”, some feel very threatened by it and were anxious about the future.54 The RPA accepted that both it and the Department had a role to help assuage that anxiety and “encourage people to embrace the fact that by changing farming practice there might be a different way forward”.55 The Department stressed that the schemes it is introducing are intended to be widely available to all types of farms. We highlighted, however, that being available is not the same as these schemes providing sufficient support for farms to stay in business.56

19. The mental health of farmers is one of the biggest challenges currently facing the sector. In October 2021, the Royal Agricultural Benevolent Institution reported that almost half of the farming community (47%) were experiencing some form of anxiety, and 36% were probably or possibly depressed.57 In light of the Department’s response, we asked about the mental health of farmers and the support the Department planned to provide to the farming sector during the transition to the new scheme. The Department pointed to the Farming Resilience Fund as a key source of support. This is a scheme to offer advice to farmers so they can understand best farming practice, how they can improve their business planning and boost productivity. However, the Department’s description indicated that the fund does not offer direct support to struggling farmers, only direct them towards other schemes. The Department also highlighted its work with farming charities, and the RPA emphasised that, instead of its past focus on IT systems, performance and payments, it saw its role as ‘here to help’. It wanted to have a closer relationship with the farmers themselves and made a commitment to do whatever it could to help farmers.58

Supporting farmers through the transition

20. The Department views 2021 as year one of seven in its efforts to regain farmers’ trust, but the NAO highlighted that it had had over three years since the first publication of its plans in February 2018 to start regaining the confidence of the farming industry. Farmers have been looking for increased clarity and detail on the Department’s proposals since then. The NAO found that where information has been released, it has been with very limited lead time: arrangements for the SFI pilot were released over three months later than planned, leaving farmers just two weeks to decide whether to take part.59 We highlighted concerns from members’ farming constituents that they did not yet have details of next year’s schemes, and that they were facing very condensed planning. As the Tenant Farmers Association told us, farming requires long-term business planning, with crop rotations and breeding programmes put together over many years. It explained that the lack of detail on schemes has had a particularly significant effect on tenant farmers, leaving them unable to develop business plans or prepare tenancy applications.

21. The Tenant Farmers Association also told us that young farmers had been promised that there would be a scheme specifically to support them to enter the farming industry, but that it had not seen this come forward. It asserted that the information that had been made available so far was “so lacking in detail that there is no way they can plan their businesses and put together a tenancy application”.60 We therefore asked witnesses about the risk that young farmers would leave the industry because they were unable to wait to see what would happen to the sector in the longer term. The National Farmers’ Union recognised this concern and told us about young farmers who were considering moving to Scotland, where there is greater certainty over the support on offer. The Confederation of Forest Industries also highlighted that a lack of clarity for the long term and how plans fit into wider net-zero targets makes it very difficult for farmers and other land managers to make sure their businesses are sustainable. It told us that this was “really worrying [as] … we desperately need the next generation to come through” and being able to deliver a sustainable farming industry for the future relied on it being profitable as well.61 The Department recognised that “providing more detail as soon as we can with good and wide communication is critical” and that it was seeking to do this.62

22. The Department acknowledged that without the detail of plans, its confidence in the scheme could appear to be “just blind optimism as far as farmers are concerned”.63 Since then, the Department has published further information on how the Sustainable Farming Incentive will work in 2022, including payment rates for the first phase.64 The Department also explained that, while it thought the confidence of the sector will increase as more detail is released, the greatest impact will occur when farmers see schemes working and payments happening on time. The Department also told us that it will publish additional information about SFI22 in November, and that information on the standards being offered in SFI for 2023 and 2024 will be published early next year, which is late in the day to give farmers sufficient lead-in time to change their systems.65

23. The Department asserted that farmer confidence and trust in its plans is improving. The Farmer Opinion Tracker survey carried out in October 2020 found that only 30% of farmers said they had all or most of the information they needed to plan their business. The Department told us that its more recent survey, carried out in April 2021, showed this figure had improved to 40%. It expected the results to have further improved since then due to the release of detailed information about the SFI pilot over the summer. However, it did not have any data on farmer opinions after this information was released. A separate survey carried out by the RPA from January to March 2021 found that only 4% of respondents were ‘very prepared’ for upcoming changes in farming and 37% ‘not at all prepared’. In addition, 41% of respondents to that survey said they did not know what SFI was.66 In view of these dire statistics the Department needs to radically review their communication strategy to inform the whole of the agricultural industry of the benefits and impacts of these changes proposed under ELM.

3 The long-term impact of the scheme

Measuring the success of the scheme

24. Although the Department has set out its high-level vision for ELM through six ‘outcomes’ set out in the 25-Year Environment Plan, it has not yet defined the specific objectives that it will be using to measure ELM’s success against this vision. HM Treasury’s Green Book highlights the importance of having up to five or six SMART (specific, measurable, achievable, realistic and time-limited) objectives for all programmes. The Department’s outline business case for the Programme sets out 24 SMART objectives, but that these are described as provisional and indicative, and the estimated cost of delivering them in full is significantly above the annual budget for ELM. Clear objectives are needed for effective appraisal, planning, monitoring and evaluation.67 The National Farmers’ Union similarly highlighted the importance of having clear objectives in designing the scheme. It explained that they were necessary to set the parameters for scheme design and that it had seen various standards within SFI being reworked multiple times due to key decisions not having been made.68

25. The NAO recommended that the Department should urgently agree a clear, realistic and logical set of strategic objectives for ELM. We asked when we could expect these to be in place. The Department also acknowledged the importance of setting these objectives. It told us that it had developed a draft set of measurable outcomes, and it was currently discussing with Ministers how to prioritise these with a view to publishing them by Christmas 2021. The Department told us that this work was progressing and that there was more that it would publish in the coming months. However, these outcomes cover the current Parliament, rather than setting out how they will contribute to longer-term government initiatives such as net zero. It told us, however, that questions about its detailed plans for spending and investment in the next Parliament, and in 2024 and beyond, were still open and while it planned to answer these, it did not consider them as urgent.69

26. We told the Department that we were concerned about the lack of baseline data, and asked what data it will use to measure environmental improvements.70 In its written evidence, the Green Alliance emphasised the importance of being able to measure outcomes in order to demonstrate value for money. It recommended that the Department should “develop standardised approaches for measuring outcomes and progress towards achieving overall objectives, and make sure they are adequately monitored to prevent potential environmental damage due to mistakes in execution.”71 We observed that in previous schemes payments were based on field sizes, which are easily measured, whereas in the new system it was difficult to tell what is going to be measured and what baseline it will be measured from, without accurate baseline data. The Department asserted that it had a very good understanding of the baseline data with respect to land. It explained that, for the soil standard, the first component of the scheme to be rolled out as part of SFI22, payments will be per hectare of land on which specified actions are carried out. The Department told us that this was because it believes it already had a detailed understanding of the activity necessary to deliver the environmental benefits intended, and therefore a baseline was not necessary to assess whether a required outcome has been achieved. It explained that later scheme components, such as peatland restoration, will benefit from a more detailed assessment of the current condition of the land in order to measure progress and the impact of the scheme. The Department told us that it had a good understanding of the environmental quality of different areas of land, and that it planned to use this to identify actions that can be taken on specific farms through the Local Nature Recovery scheme.72

27. ELM and other agricultural policies are expected to contribute to government’s environmental objectives, such as species abundance and the 25-Year Environment Plan. However, the RSPB highlighted that there is no overarching vision for agriculture in England or for how ELM will contribute to these wider objectives.73 The recently published net-zero strategy highlighted ELM as a key driver of net-zero,74 but the National Farmers’ Union told us that it had not yet seen this reflected in the development of the scheme. It suggested that the ambition may be too great and questioned whether the ELM budget was sufficient to deliver on all of the environmental objectives attributed to it.75 The Confederation of Forest Industries agreed that there was a lack of clarity about how ELM fits in with other schemes and with Government commitments around net zero and tree-planting targets.76

The expected impact of the scheme on the farming sector

28. In addition to the six environmental goals set out in the 25-Year Environment Plan, the Department expects the Future Farming and Countryside Programme to help improve farm productivity. It explained that its work to improve productivity would focus on the resilience of the sector and enabling “the least productive farmers to prosper”.77 However the RSPB told us that the detail presented by the Department so far only related to SFI, which was only one of three components of the planned scheme, and that it lacked information on the rest of the scheme or the expected wider impact on farming in the UK. It explained that other factors were also fundamentally important to the viability of farming including market supply chains, equity, fairness, advice and trade agreements.78

29. We asked whether the design of ELM meant that land would be taken out of production and the UK would therefore either need to import more food or food prices would rise as a result. Professor Rob Fraser told us that the UK was a large net importer of food, importing around £18 billion of food each year and exporting less than £5 billion. He explained that, while the UK could import food and energy, it could not import environmental benefits. He explained that as a result of ELM’s ambition to “maximise the value to society of the landscape in this country”, the UK was likely to become increasingly reliant on food imports.79 The National Farmers’ Union told us it was important for the UK to consider its self-sufficiency in food production to avoid having to import food from countries with lower environmental standards and the risk of there being no net improvement for the environment.80 Our recent report on net zero highlighted a risk in the short term that policies to reduce emissions transfers them abroad instead,81 and the National Farmers’ Union emphasised that “we cannot simply export our environmental conscience”.82

30. The Department told us that it did not think that ELM’s focus on environmental management would result in the UK importing more food. It explained that the scheme was also designed to boost productivity so that, despite taking land out of production to deliver environmental benefits, farmers can produce more food from the remaining land. It said that this would potentially free up some land to convert to forestry without the need to import any more food. This was echoed by the RSPB, which told us that delivering environmental benefits could also support long-term viable farming and directly improve farm businesses through increased yield. The Department said that there was nothing in its approach or programme that suggested that in 10 years’ time the UK would be importing more food.83

31. The Tenant Farmers Association told us that the introduction of the new scheme was a major concern for its members, and that it would be important that the scheme contained options to meet the specific needs of both tenant farmers and of small farms. It emphasised that these were not the same, as there are some large tenant farms, and not all small farms are tenanted.84 We asked the Department what the likely impact of the scheme would be for smaller farms or tenanted farms and whether taking land out of food production would mean these farms would go out of business. The Department told us that the size of the farm “does not of itself inform the efficiency of the farm”.85 David Kennedy, Director-General for Food, Farming and Biodiversity, expanded on this by stating that the Department’s objective was “that every farm can now be viable in the future through the farming transition”,86 and that the Department’s evidence and analysis showed that this was possible. The Department also explained that, although small farms and tenant farmers were more reliant, on average, on direct payments, the scheme would not just take direct payments away, but the focus on improving productivity and resilience would mean that every farm would have an opportunity to prosper in the future. It similarly told us that the uptake of the pilot suggested that the scheme would be attractive to small farms and to tenant farmers.87

Formal minutes

Monday 13 December 2021

Members present:

Dame Meg Hillier, in the Chair

Sir Geoffrey Clifton-Brown

Mr Richard Holden

Nick Smith

Environmental Land Management Scheme

Draft Report (Environmental Land Management Scheme), proposed by the Chair, brought up and read.

Ordered, That the draft Report be read a second time, paragraph by paragraph.

Paragraphs 1 to 31 read and agreed to.

Summary agreed to.

Introduction agreed to.

Conclusions and recommendations agreed to.

Resolved, That the Report be the Thirty-first of the Committee to the House.

Ordered, That the Chair make the Report to the House.

Ordered, That embargoed copies of the Report be made available, in accordance with the provisions of Standing Order No. 134.


Adjourned till Wednesday 15 December at 1:30pm


The following witnesses gave evidence. Transcripts can be viewed on the inquiry publications page of the Committee’s website.

Thursday 21 October 2021

Tom Bradshaw, Vice President, National Farmers Union; Jenna Hegarty, Deputy Director Policy and Advocacy, Royal Society for Protection of Birds (RSPB); Lynette Steel, Farm Policy Adviser, Tenants Farmers Association; Professor Rob Fraser, Emeritus Professor of Agricultural Economics, University of Kent; Maria Bellissimo, Policy lead, Confederation of Forest IndustriesQ1–30

Tamara Finkelstein, Permanent Secretary, Department for Environment Food and Rural Affairs; David Kennedy, Director General, Food, farming and biodiversity, Department for Environment Food and Rural Affairs; Paul Caldwell, Chief Executive, Rural Payments AgencyQ31–134

Published written evidence

The following written evidence was received and can be viewed on the inquiry publications page of the Committee’s website.

EMS numbers are generated by the evidence processing system and so may not be complete.

1 Auvikki de Boon (PhD student, University of Reading); Dr David Rose (Elizabeth Creak Associate Professor of Agricultural Innovation and Extension, University of Reading); and Prof. Camilla Sandström (Professor in Political Science, Umeå University, Sweden) (EMS0001)

2 The Farming Forum Grassroots Group (EMS0002)

3 Boden, Mr Richard (EMS0005)

4 British Canoeing, British Mountaineering Council, Open Spaces Society and the Ramblers (EMS0007)

5 Green Alliance (EMS0003)

6 Wildlife and Countryside Link (EMS0009)

7 National Farmers Union (EMS0004)

8 Nature Friendly Farming Network (EMS0006)

9 Royal Society for Protection of Birds (RSPB)) (EMS0010)

10 Historic England (EMS0008)

List of Reports from the Committee during the current Parliament

All publications from the Committee are available on the publications page of the Committee’s website.

Session 2021–22





Low emission cars

HC 186


BBC strategic financial management

HC 187


COVID-19: Support for children’s education

HC 240


COVID-19: Local government finance

HC 239


COVID-19: Government Support for Charities

HC 250


Public Sector Pensions

HC 289


Adult Social Care Markets

HC 252


COVID 19: Culture Recovery Fund

HC 340


Fraud and Error

HC 253


Overview of the English rail system

HC 170


Local auditor reporting on local government in England

HC 171


COVID 19: Cost Tracker Update

HC 173


Initial lessons from the government’s response to the COVID-19 pandemic

HC 175


Windrush Compensation Scheme

HC 174


DWP Employment support

HC 177


Principles of effective regulation

HC 176


High Speed 2: Progress at Summer 2021

HC 329


Government’s delivery through arm’s-length bodies

HC 181


Protecting consumers from unsafe products

HC 180


Optimising the defence estate

HC 179


School Funding

HC 183


Improving the performance of major defence equipment contracts

HC 185


Test and Trace update

HC 182


Crossrail: A progress update

HC 184


The Department for Work and Pensions’ Accounts 2020–21 – Fraud and error in the benefits system

HC 633


Lessons from Greensill Capital: accreditation to business support schemes

HC 169


Green Homes Grant Voucher Scheme

HC 635


Efficiency in government

HC 636


The National Law Enforcement Data Programme

HC 638


Challenges in implementing digital change

HC 637

1st Special Report

Fifth Annual Report of the Chair of the Committee of Public Accounts

HC 222

Session 2019–21





Support for children with special educational needs and disabilities

HC 85


Defence Nuclear Infrastructure

HC 86


High Speed 2: Spring 2020 Update

HC 84


EU Exit: Get ready for Brexit Campaign

HC 131


University technical colleges

HC 87


Excess votes 2018–19

HC 243


Gambling regulation: problem gambling and protecting vulnerable people

HC 134


NHS capital expenditure and financial management

HC 344


Water supply and demand management

HC 378


Defence capability and the Equipment Plan

HC 247


Local authority investment in commercial property

HC 312


Management of tax reliefs

HC 379


Whole of Government Response to COVID-19

HC 404


Readying the NHS and social care for the COVID-19 peak

HC 405


Improving the prison estate

HC 244


Progress in remediating dangerous cladding

HC 406


Immigration enforcement

HC 407


NHS nursing workforce

HC 408


Restoration and renewal of the Palace of Westminster

HC 549


Tackling the tax gap

HC 650


Government support for UK exporters

HC 679


Digital transformation in the NHS

HC 680


Delivering carrier strike

HC 684


Selecting towns for the Towns Fund

HC 651


Asylum accommodation and support transformation programme

HC 683


Department of Work and Pensions Accounts 2019–20

HC 681


Covid-19: Supply of ventilators

HC 685


The Nuclear Decommissioning Authority’s management of the Magnox contract

HC 653


Whitehall preparations for EU Exit

HC 682


The production and distribution of cash

HC 654


Starter Homes

HC 88


Specialist Skills in the civil service

HC 686


Covid-19: Bounce Back Loan Scheme

HC 687


Covid-19: Support for jobs

HC 920


Improving Broadband

HC 688


HMRC performance 2019–20

HC 690


Whole of Government Accounts 2018–19

HC 655


Managing colleges’ financial sustainability

HC 692


Lessons from major projects and programmes

HC 694


Achieving government’s long-term environmental goals

HC 927


COVID 19: the free school meals voucher scheme

HC 689


COVID-19: Government procurement and supply of Personal Protective Equipment

HC 928


COVID-19: Planning for a vaccine Part 1

HC 930


Excess Votes 2019–20

HC 1205


Managing flood risk

HC 931


Achieving Net Zero

HC 935


COVID-19: Test, track and trace (part 1)

HC 932


Digital Services at the Border

HC 936


COVID-19: housing people sleeping rough

HC 934


Defence Equipment Plan 2020–2030

HC 693


Managing the expiry of PFI contracts

HC 1114


Key challenges facing the Ministry of Justice

HC 1190


Covid 19: supporting the vulnerable during lockdown

HC 938


Improving single living accommodation for service personnel

HC 940


Environmental tax measures

HC 937


Industrial Strategy Challenge Fund

HC 941


1 Department for Environment, Food and Rural Affairs, The Future Farming and Environment Evidence Compendium, September 2019

2 C&AG’s Report, The Environmental Land Management scheme, Session 2021–22, HC 664, 15 September 2021

3 C&AG’s Report, para 1 - 3

4 Committee of Public Accounts, Progress on the Common Agricultural Policy Delivery Programme, Fortieth Report of Session 2016–17, HC 766,10 February 2017

5 Q 43; C&AG’s Report, para 1 – 3; Department for Environment, Food & Rural Affairs, A Green Future: Our 25 Year Plan to Improve the Environment, January 2018

6 C&AG’s Report, para 1.10

7 C&AG’s Report, paras 1.9–1.11

8 Department for Environment, Food & Rural Affairs, Health and Harmony: the future for food, farming and the environment in a Green Brexit, February 2018, pars 8–17

9 Comptroller & Auditor General, Early review of the new farming programme, Session 2017–19, HC 2221, 5 June 2019; Department for Environment, Food & Rural Affairs, The Path to Sustainable Farming: An Agricultural Transition Plan 2021 to 2024, November 2020

10 C&AG’s Report, figure 10

11 Qq 1, 3

12 C&AG’s Report, para 2.4

13 EMS0002 – Environmental Land Management Scheme, The Farming Forum Grassroots Group, 22 October 2021

14 Qq 113–114; C&AG’s Report, paras 11, 14, 16, 21

15 C&AG’s Report paras 16, 1.26–1.27

16 Qq 49–51

17 C&AG’s Report para 15

18 Qq 52, 54

19 Q 64

20 Q 26; EMS0004 – Environmental Land Management Scheme, The National Farmers Union, 22 October 2021

21 Q 27

22 Qq 27–28

23 EMS0009 – Environmental Land Management Scheme, Wildlife and Countryside Link, 22 October 2021

24 Qq 57, 95, 127

25 Qq 57, 127

26 Qq 56–57, 95, 127

27 C&AG’s Report paras 13, 18

28 Q 95

29 Q 127

30 Q 12; Committee of Public Accounts, Progress on the Common Agricultural Policy Delivery Programme, Fortieth Report of Session 2016–17, HC 766,10 February 2017

31 Committee of Public Accounts, The Common Agricultural Policy Delivery Programme, Twenty-sixth Report of Session 2015–16, HC 643, 2 March 2016

32 Committee of Public Accounts, Progress on the Common Agricultural Policy Delivery Programme, Fortieth Report of Session 2016–17, HC 766,10 February 2017

33 Q 85

34 C&AG’s report para 3.11

35 Qq 1, 30

36 EMS0004 – Environmental Land Management Scheme, National Farmers Union, 22 October 2021

37 Qq 8–9

38 Qq 62–63, 110

39 EMS0010 – Environmental Land Management Scheme, Royal Society for the Protection of Birds (RSPB), 1 November 2021

40 C&AG’s Report, para 2.3

41 Department for Environment, Food and Rural Affairs, The Future Farming and Environment Evidence Compendium, September 2019

42 Q 123

43 Q 60

44 Update on the Sustainable Farming Incentive pilot - Future Farming (blog.gov.uk)

45 Letter from Tamara Finkelstein CB, Department for Environment, Food & Rural Affairs, to Dame Meg Hillier MP, Chair, Public Accounts Committee, 5 November 2021

46 Department for Environment, Food & Rural Affairs, Agriculture in the United Kingdom 2020, July 2021

47 Q 123

48 Q 12

49 Q 30

50 Q 53

51 Q 130

52 C&AG’s report paras 6, 1.4, 1.13, Figure 4

53 Q 105

54 Qq 92–94, 116

55 Q 94

56 Qq 59–60

57 Royal Agricultural Benevolent Institution, The Big Farming Survey 2021, 15 October 2021

58 Qq 61, 118

59 C&AG’s report para 3.10

60 Qq 9–10

61 Qq 11, 16

62 Q 87

63 Q 62

64 Department for Environment, Food & Rural Affairs, Sustainable Farming Incentive: how the scheme will work in 2022, 2 December 2021

65 Qq 46–47, 63, 89

66 Qq 99–101; C&AG’s report para 3.16, Figure 7

67 C&AG’s report para 1.17 – 1.18

68 Q 3

69 Qq 43–44

70 Q 76

71 EMS0003 – Environmental Land Management Scheme, Green Alliance, 22 October 2021

72 Qq 76–78, 82

73 Q 3

74 Department for Business, Energy & Industrial Strategy, Net Zero Strategy: Build Back Greener, October 2021, https://www.gov.uk/government/publications/net-zero-strategy

75 Q 18

76 Q 15

77 Q 60

78 Q 13

79 Qq 21–22

80 Q 23

81 Committee of Public Accounts, Achieving Net Zero, Forty-Sixth Report of Session 2019–21, HC 935, 5 March 2021

82 Q 23

83 Qq 23, 61, 134

84 Qq 4–5

85 Qq 59–60

86 Q60

87 Qq 60, 111