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Sam Hall: A budget fit for farmers

Sam Hall, Director at CEN

Over the last parliament, a generational change to the way the government supports farmers has got underway. In increasing numbers, farmers in England are signing up to new Environmental Land Management schemes (ELMs) that reward them for treading more lightly on the environment whilst producing food. To ensure ELMs succeed in securing a widespread shift to nature-friendly farming practices, it is imperative that their funding is protected in real terms in the next parliament.

The reforms to farm payments have been one of the clearest examples of a Brexit opportunity being seized and sound conservative principles being applied to environmental policy. The EU’s Common Agricultural Policy will be completely phased out in England by 2028. These legacy Brussels schemes are widely regarded to have been overly bureaucratic, financially wasteful, economically inefficient, and environmentally harmful, with the vast majority of support going to the biggest landowners, little public benefit in return for taxpayers’ money, and stark declines in farmland birds.

By contrast, the new schemes offer substantial benefits for farmers, taxpayers, food security, and the natural environment. They support farmers to improve the foundations of food production, such as healthy soils, clean water, and habitat for pollinators, while tackling the biggest medium to long-term threats to food security, namely climate change and biodiversity loss. They also deliver a clear return for taxpayers’ money, which will help maintain support for the farming budget alongside competing public spending priorities. 

Farmers are on the frontline of climate change and biodiversity loss. No other industry is as dependent on a healthy natural world, nor as susceptible to increasingly extreme weather, as this winter’s poor harvests demonstrate. And as farmers manage over 70% of our land area, there is no way to hit our environmental goals without them. To restore nature, we must give farmers the flexible and generous support they need to adopt more sustainable and resilient farming practices, from widening hedgerows and using cover crops, to planting herbal leys and minimising soil disturbance. 

The government has taken an iterative approach to designing the schemes, constantly improving them based on farmers’ feedback. As a result, take-up has grown, with over 55,000 agreements with farmers now in place. But the budget has been frozen in cash terms during this parliament, meaning high levels of inflation have eroded its value. On this trajectory, the incentives for farmers to adopt nature-friendly practices will become progressively less attractive, meaning fewer farmers participating and less environmental improvement. And the full promise of the schemes will not be realised.

That’s why CEN is calling for the budget to be protected throughout the next parliament in real terms. This will ensure farmers are properly rewarded for the environmental public goods they deliver, enabling both higher uptake and more environmental ambition. It will also give farmers a resilient income stream to complement their revenue from food production. This ask unites farming and environmental groups, and is popular in rural communities where concern about climate change is higher than the national average among swing voters. 

It was welcome therefore that the Conservative Party manifesto committed to uprating the farming budget in line with inflation. The additional £1 billion per year was earmarked for further rounds of grants for farming equipment that can boost agricultural productivity and reduce inputs like pesticides and fertilisers. Although this spending does have an environmental benefit, grants arguably give the biggest financial benefit to farm machinery manufacturers, who no doubt push up their prices in response, whereas ELMS payments are mostly kept by the farmer. All the same, the commitment frees up the rest of the farming budget, roughly £2.4 billion once the legacy EU payments are finally phased out in 2028, for ELMS. 

To be clear, this is not an argument for permanent subsidy. In future parliaments, the pressure on public funds could be relieved as private markets for nature expand. More businesses, from water companies to housing developers, are looking to buy nature credits from farmers to meet environmental obligations. To ensure these nascent private markets aren’t crowded out by government schemes, more focus in the next parliament should be put on blending public nature-friendly farming incentives with private funding, to maximise incomes for farmers and value for taxpayers’ money. 

The Conservative manifesto featured several proposals that would boost private funding for nature, from reforming environmental rules for housing and infrastructure developers projects so more cash gets spent on nature rather than consultants and lawyers, to reforming water industry regulation to unlock more nature-based solutions, such as wetlands, reedbeds, and riparian woodlands. Further measures to grow demand for private nature credits, such as requiring large companies to report on their impacts on biodiversity and exposure to nature-related risks, should also be put in place. Taken together with the uprating of the farming budget, the Conservatives’ proposals would significantly increase funding for nature in the next parliament. 

If we get this transition right, it could provide the blueprint for countries around the world looking to reform their systems of agricultural support and align them with their environmental goals. With sufficient funding both to drive strong farmer uptake and high environmental ambition, this can be a genuinely world-leading policy and a huge Brexit win.



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