Farmers could be hit by 'unintended consequences' of payments policy shake-up

Farming families, the environment and the nation’s ability to feed itself risk being damaged by “unintended consequences” because of the Government’s approach to introducing a new regime of financially supporting British agriculture, a Whitehall watchdog has warned.

Defra hopes 82,500 farmers will be signed up to its Environment Land Management Scheme by 2028. Picture by ValentinValkov/stock.adobe

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The National Audit Office (NAO) says farmers have little time to prepare for a three-year pilot of a new Environmental Land Management Scheme (ELMS) which is due to start in 2021. The final scheme will replace direct payments made under the European Union’s Common Agricultural Policy (CAP) by 2028.

Two-fifths of farmers would make a loss without direct payments based on how much land they farm but those payments will be phased out between 2021 and 2028. Instead, farmers will be paid for delivering environmental benefits such as habitat for wildlife, flood reduction and carbon storage under the new scheme.

Defra criticism

However, to date, the Department for Environment, Food and Rural Affairs (Defra) has given farmers no guidance to help their businesses adapt or about how to work other farmers to capitalise on the new policy, the NAO reports.

Defra is also criticised for its plans to allow just two years to test how well the new scheme works at scale, after it revised its plans for the number of farmers to take part in the pilot’s first year from 5,000 to 1,250.

By 2028, Defra hopes 82,500 farmers will be signed up to its ELMS but the NAO warns low take-up could see farmers who are not involved quit the industry or try replacing lost income by adopting “more intensive farming methods that could damage the environment”.

It also warned that while Defra expects better farm productivity will partly offset losses from direct payments, there is little evidence that many farms are equipped to drive such gains.

The NAO also criticised Defra for setting out its digital needs for its ELMS before knowing which environmental outcomes farmers will be paid for and at what cost, meaning “significant technology changes” may be needed at a later date.

Comprehensive planning needed

Gareth Davies, head of the NAO, urged Defra to fully test and evaluate the new scheme.

He said: “Defra is moving forward with a policy which is a radical departure from the CAP farm payment regime we have known for 40 years. Because it is such a big change, from acreage-based direct payments to an environmental stewardship scheme, we have looked at Defra’s approach to implementing its policy at an early stage.

“We urge Defra to give itself time and space to fully test and evaluate the policy, and for comprehensive planning, to avoid any unintended consequences for the farming community, our environment or ability to feed ourselves.”

Meg Hillier MP, who chairs parliament’s Public Accounts Committee, said past failures brought “woeful consequences” for farms as she called on Defra to urgently review its plans to avoid farmers being let down again.

"Enough farmers will need to sign-up to the new scheme if it is to make a worthwhile impact on the environment. Yet Defra currently has no plans to test its assumptions about how many will sign-up and it is concerning that it is giving farmers such little time to prepare," Ms Hillier said.

“The Committee has seen the woeful consequences for the farming industry of previous Government failures. Defra must urgently review its plans, to make sure they are realistic and that farmers are not let down again.”

Farmers want reassurance

Dorothy Fairburn, northern director of the Country Land and Business Association (CLA), said farmers need reassuring about Defra's capacity to manage the policy changes, saying: “We welcome the additional scrutiny provided by the NAO into Defra’s new farming programme. Given the proposed changes and the radical departure from the CAP, farmers and land owners need to be reassured that there is certainty that Defra has the planning, resource and strategic oversight needed to manage the programme.

“Defra itself has highlighted that moving to a system of contracts with farmers to deliver public goods – mainly environmental outcomes – is something that has not been tried before anywhere in the world. While the CLA is supportive of this innovative departure in policymaking, this should go hand in hand with a recognition of the requirements and risks of designing and delivering the new ELMS.

“We are pleased that previously raised concerns around communications with farmers, the transition period from current schemes to ELMS, and more detail around payment scope and rates have also been raised by the NAO. We also agree with the NAO conclusion that some assumptions may be over-optimistic, including around productivity gains, and that more evidence, modelling and scenario testing is needed.”

New scheme will 'unlock potential'

Farming Minister Robert Goodwill, MP for Scarborough and Whitby, said Defra does not underestimate the scale of the task in hand.

“After years of inefficient, unfair and outdated policy under the CAP, our ambitious plans for a new land management system will unlock the potential for farmers and land managers to deliver environmental benefits that go hand in hand with a profitable, productive business," the Minister said.

“We do not underestimate the scale of the task in implementing the new Environmental Land Management Scheme, which is why we are involving such a wide range of stakeholders in its development.

"We will be running a National Pilot over three years to test the policy and make sure we get it right, implementing the lessons learnt into the final scheme. We will also set out more specific detail on what the ELM scheme will pay for well in advance of the pilot being rolled out.”