Policy paper

[Withdrawn] Agricultural Transition Plan: June 2021 progress update

Updated 26 September 2022

This policy paper was withdrawn on 26 September 2022

This publication has been withdrawn and replaced with the scheme guidance.

Applies to England

This publication has been withdrawn and replaced with the scheme guidance.

1. Foreword

As we develop our future agriculture policy, we want to support the choices that individual farm enterprises make. That is why we have already announced plans for an exit scheme to help farmers who want to exit the sector to do so with dignity, and it is why we are developing new grants to support farmers who want to invest in their business, reduce their costs and improve their profitability.

Today we are publishing details of the first options under the Sustainable Farming Incentive, which will be open to farmers who are eligible for the Basic Payment Scheme. We’ve decided to start with soil health since that is where everything connected with successful farming starts. Enhancing the natural health and fertility of our soils is one of the most important things we can do to start making our farming more profitable and sustainable.

As long ago as 1947, Eve Balfour wrote about the living soil and urged us to look after it. Sir Albert Howard, in 1944, warned us about the ‘banditry’ of trying to mine agricultural land rather than nurture it. Our soils are more than just a medium and soil fertility is about far more than just N, P, and K. Soils are alive and, when well-managed, host a huge array of biodiversity.

Every farmer knows that the presence of humus in the soil, and the relationship between beneficial bacteria, mycorrhizal fungi and plant roots is one of the keys to plant health. Somewhere along the way, this ancient understanding and insight slipped from view. Increased specialisation in the late twentieth century and the loss of livestock from the lowlands has led to a reduction in organic matter and a decline in soil health. Meanwhile the associated loss of rotation has stored up challenges with pests and diseases. As climate change has moved up the agenda, the role of our soils as a potential carbon store has been increasingly recognised.

Through our soil standards under the Sustainable Farming Incentive, we could save as much as 60,000 tonnes of CO2 each year from 2023 to 2027, increasing to 800,000 tonnes per year by 2037. Our initial Sustainable Farming Incentive offer will also include a Moorland and Rough Grazing Standard designed to help us assess the condition of the moorlands and work out how best to invest in their restoration through sustainable farming practices and an Annual Health and Welfare Review.

To incentivise a high take up of the new scheme, we are adopting a new approach to payments that is more generous than the old EU schemes so we can get the levels of uptake we need to achieve our environmental goals. We will also review payments in Countryside Stewardship so that we can increase the number of farmers providing environmental outcomes as we move towards rollout of our new offers.

We also want to support those farmers committed to improving the health of their livestock, so we will be opening a fund to support an Annual Health and Welfare Review conducted by a vet to help inform farmers’ work to improve animal health and welfare. This is the first element of our Animal Health and Welfare Pathway, which we’ve been working with the sector to design and develop.

I have said many times that we want the move from the old system to the new to be an evolution not a revolution. We recognise the dependency on area payments that the old EU schemes created and the distortions it caused on land rents and input costs, so we will unwind those distortions with care over seven years. However, it is also my hope that farmers who embrace these new schemes will discover that healthy soils and healthy livestock leads to higher profitability.

2. Purpose of this update

We said in the Agricultural Transition Plan that, by June 2021, we would provide further details of the early rollout of the Sustainable Farming Incentive scheme and what it will pay for. This document sets out these further details, including eligibility for the scheme and how farmers can be rewarded through the scheme when it opens in spring 2022. We know from working with farmers and other stakeholders that this is important information to help farmers plan ahead.

The Sustainable Farming Incentive is part of a wider set of reforms, which we set out in the Agricultural Transition Plan 2021 to 2024 in November 2020. We are continuing our work to develop the full range of schemes and services set out in the Agricultural Transition Plan, as set out in section 4.

To support coordination between England’s policy and policy in Scotland, Wales and Northern Ireland, we have set up the UK Agricultural Support Framework. This provides for non-legislative UK collaboration, coordination and cooperation on agricultural support between all four UK administrations.

3. Our vision for farming and the countryside in England

Our Agricultural Transition Plan sets out our plans for a seven-year transition period to phase out the subsidies and schemes of the Common Agricultural Policy and introduce our own domestic policy for farming and the countryside in England.

By 2024, we will have fully introduced our three new environmental land management schemes and they will be open for applications: the Sustainable Farming Incentive, Local Nature Recovery and Landscape Recovery.

Through the Sustainable Farming Incentive, we want all farmers to have the opportunity to be rewarded for:

• maintaining and enhancing the natural environment
• reducing carbon emissions
• improving the health and welfare of farmed animals across the whole farmed countryside

We have launched and received more than 2,000 applications for the Sustainable Farming Incentive pilot. In 2022, we will start the early rollout of core elements of the Sustainable Farming Incentive. This document provides further details on that.

Local Nature Recovery will be focused on delivering the right things in the right places, factoring in the views of local people. Throughout 2021, we will be working with stakeholders to develop and test new parts of the scheme. We are also analysing the results of our five Local Nature Recovery Strategy pilots in Northumberland, Cumbria, Greater Manchester, Buckinghamshire and Cornwall. In the autumn, we will publish more information on the next phase of piloting for the scheme, which will start in 2022. We then plan to start a phased rollout of the scheme from 2023.

Landscape Recovery will focus on the delivery of landscape and ecosystem recovery through long-term, land use change projects. We are currently proposing to open applications to sites between 500 to 5,000 hectares, which could be provided by collaborative groups of farmers and land managers, individuals, or organisations such as non-government organisations.

We intend to start market engagement for our first set of Landscape Recovery projects this summer and, subject to this, open applications for bids in the autumn. This will be followed by project development for the first projects in early 2022. There will be a final assessment point at the end of the project development phase, and projects that meet our requirements will be awarded a long-term funding agreement. This will allow delivery on the ground to start. We will be launching at least 10 projects between 2022 and 2024.

We want our new schemes to enable farmers and land managers to combine revenue from both public and private sector funding, wherever this can unlock a wider range of benefits, or lead to better overall environmental outcomes. To support this, as well as providing government schemes, we are developing and promoting private markets for high-quality ecosystems and the services they provide. Farmers will be able to earn an income from private as well as government sources for environmental and other public goods they produce. This will allow public sector money to go further, enabling greater progress in the agricultural transition.

Further details about our approach to setting payment levels in this context can be found in the Environmental land management schemes: payment principles document.

3.1 Allocation of funding

We will maintain current average levels of investment in farming of £2.4 billion per year in England over the life of this Parliament. All funding released from reductions in Direct Payments will be re-invested into delivering new schemes, primarily schemes that provide environmental and climate outcomes. We will also be investing in environmental improvements through initiatives such as the Nature for Climate Fund, which will see £640 million invested in trees and peat restoration over the course of the Parliament.

Over this Parliament, we envisage spending 30% of the funding released for environment, climate and animal health and welfare outcomes on farm-level actions such as the Sustainable Farming Incentive. The remainder will be spent on locally tailored initiatives (such as through Local Nature Recovery and Countryside Stewardship) and landscape-scale interventions (such as Landscape Recovery and Nature for Climate projects). By 2028, we currently expect spending to be evenly split across farm-level, locally tailored, and landscape-scale investment.

We will keep these allocations under review as we progress through the transition and learn more about the demand for and outcomes and value for money from each scheme.

4. Progress since we published the Agricultural Transition Plan

Since publishing the Agricultural Transition Plan in November 2020, we have made progress in a number of areas:

4.1 Direct Payments

The Rural Payments Agency delivered its best ever December payment performance and paid just under 98% of 2020 Basic Payment Scheme claims, despite the challenges caused by the Coronavirus pandemic.

We have made simplifications to the 2021 Basic Payment Scheme, as set out in the Agricultural Transition Plan. This included removing the greening rules. These simplifications meant the scheme guidance was reduced by about half.

We provided a calculator to show farmers how progressive reductions could affect their payment for scheme years 2021 to 2024.

We published a consultation about our proposed lump sum exit scheme for farmers and approach to introducing delinked payments in 2024.

4.2 Environmental, climate and animal health and welfare outcomes

We have:

• run an expression of interest process and invited 2,000 farmers to apply to take part in our Sustainable Farming Incentive pilot scheme
• designed the first step on the Animal Health and Welfare Pathway: the Annual Health and Welfare Review, which will be included in the Sustainable Farming Incentive offer in 2022
• continued to develop other components of the Animal Health and Welfare Pathway, including surveying 300 farms to understand where animal welfare can be improved on farm – this was part of our research to inform payment by results pilots
• launched another round of environmental land management tests and trials, focusing in particular on Landscape Recovery - we received over 70 applications, which we are currently reviewing
• continued to prepare for our first Landscape Recovery projects and developing the Local Nature Recovery scheme, learning lessons from our tests and trials and previous schemes
• put in place extra support through Farming in Protected Landscapes, which will open for applications through Protected Landscape bodies this summer
• launched a new round of transitional Countryside Stewardship, which we have simplified and improved – including making the compliance regime fairer and more proportionate and providing a new, expanded capital grants offer which has had a high level of interest from farmers and land managers
• continued to develop the Tree Health pilot in advance of launch later this summer

4.3 Farming prosperity

We have:

• invited organisations to apply to run resilience schemes to provide free business planning advice to farmers help them plan their way through the agricultural transition - we expect these to start in August 2021
• continued to develop a Farming Investment Fund, which will be launched by October 2021
• agreed a partnership with UKRI for delivering new innovation, research and development competitions due to open for applicants from autumn 2021 with projects starting in 2022
• launched the Farming Innovation Pathways competition for research and development within UK Research and Innovations’ Transforming Food Production programme to develop farm-focused innovations. We increased funding for the programme to £14.5 million due to high demand and quality research projects across farming sectors; projects will start from October 2021
• continued to work with the industry-led group on the establishment of the Institute of Agriculture and Horticulture
• started work to co-design our New Entrant’s scheme

4.4 Regulation and enforcement

We have:

• carried out co-design work with farmers, land-managers and others that interact with farming policy including inspectors and experts to collaboratively design our future regulatory system
• gained greater insight into how people experience regulation, which has informed our planning of the next phase of co-design work to make regulation fairer, simpler and more effective
• identified two focus areas to explore more with users (nutrient management and livestock traceability) - these areas were recognised as problematic, either because regulation in these areas is seen as unfair, with disproportionate enforcement or ineffective in addressing environmental harm and its causes, including as a result of current low levels of compliance

We have also allocated necessary budget and set the Environment Agency a target of at least 1,500 advice-led inspections to be undertaken in financial year 2021/22, to support more farmers to meet legal requirements and improve water quality. The inspections will be risk based, so will include protected sites. This work builds on the successful Environment Agency and Catchment Sensitive Farming work on the River Axe in 2020. This is in addition to the Environment Agency’s work with permitted farms.

The results from our work on focus areas will identify opportunities to make improvements to our regulatory standards and the system that enforces them.

Alongside designing the government’s future regulatory approach, we are also making improvements, where possible, to our current regulatory system.

Those interested in taking part in future co-design sessions on future farming can email ffcpcodesign@defra.gov.uk.

You can find information about the full range of schemes in Future farming: what’s changing.

5. Details of the Sustainable Farming Incentive offer in 2022

5.1 Overview of the scheme

The Sustainable Farming Incentive will accelerate the large-scale adoption of more sustainable approaches on all types of farms, building on the excellent practices that are already happening on many farms. The scheme will be designed to be accessible, relevant, and attractive to the widest possible range of farmers, to support at least 70% of eligible farms to take part by 2028.

We have developed the scheme so far through a process of co-design, involving engagement groups, tests and trials, and formal consultations. Our pilot will start in October 2021 with farmers across the country helping us to develop and test elements of the scheme before they’re added into the live service between 2022 and 2024. We would like to thank all those who have taken part for their time and commitment to designing a scheme that works.

5.2 What the Sustainable Farming Incentive will include from 2022

We plan to make some core elements of the scheme available from 2022. Then, we will gradually expand the scheme until all elements are available from 2024/25 onwards.

The core elements of the Sustainable Farming Incentive that will be available in 2022 are:

• arable and horticultural soils standard
• improved grassland soils standard
• moorland and rough grazing standard
• Annual Health and Welfare Review

We think this a good place to start for a number of reasons. Firstly, because healthy soils, through effective soil management, underpin a range of benefits and important ecosystem services - including flood risk mitigation, improved water quality, improved biodiversity, and carbon storage.

Sustainable soil management requires effective approaches to farm husbandry, which in turn support agriculture and other sustainable land uses and reduce harm to the environment.

Secondly, these standards are widely applicable, which means they will provide opportunities for a wide range of farmers to be rewarded for producing public goods and can help us achieve positive outcomes at scale.

Farmers will be able to take up a Sustainable Farming Incentive agreement on land parcels covered by an existing agreement, provided the Sustainable Farming Incentive standard they choose is compatible with that existing agreement and does not result in them being paid twice for similar activities.

Finally, for many farmers, the Annual Health and Welfare Review will be their first step on the Animal Health and Welfare Pathway – which is industry and government’s shared ambition to produce healthier, higher welfare animals. The review will help us better understand the health and welfare of the national herd and flock and enable us to target future support in the right way at both farm and national level.

By making core elements of the Sustainable Farming Incentive available from 2022, alongside existing schemes, we are aiming to:

• provide more ways for farmers to be rewarded for producing public goods on their land that are not already rewarded through other schemes, as early as possible in the transition period
• bring more land into environmental management – our aim is for at least 70% of farms to participate in agri-environment schemes by 2028 (compared with around 32% now)
• start to deliver increased environmental, climate change and animal health and welfare outcomes, including:
  • carbon: initial projections are that the Sustainable Farming Incentive scheme soil standards (arable and horticultural soils and improved grassland soils) could deliver average potential carbon savings of up to 60,000 tonnes of CO2 equivalent in England annually over the fourth carbon budget period under the Climate Change Act, from 2023 to 2027^{[footnote 1]}.These average potential carbon savings could reach up to 800,000 tonnes of CO2 equivalent in England annually over the sixth carbon budget (CB6) period, from 2033 to 2037^{[footnote 1]}. These savings are roughly equivalent to a total of up to 400,000 cars off the road per year over the CB6 period^{[footnote 2]}.These soil standards include important potential mechanisms to sequester more carbon, but we know that we must do more to deliver our net zero ambitions
  • biodiversity: the soil standards will maintain and enhance habitat condition, as well as increasing the area of and improving the connectivity of priority and other semi-natural habitats
  • animal health and welfare: the review will establish a baseline for animal health and welfare on farm and at a national level so we can target improvements over the lifetime of the transition period
• roll out the scheme in an incremental way, expanding and improving it as we go, including feeding in the learning from piloting

5.3 Eligibility

When the scheme starts in 2022:

• the environmental standards will be open to farmers who are eligible for payments under the Basic Payment Scheme (BPS)
• the Annual Health and Welfare Review will initially be available for all commercial^{[footnote 3]} cattle, pig and sheep keepers who are eligible for BPS

The scheme will also be open to farmers eligible for BPS, who already have an agreement under an existing agri-environment scheme (such as Countryside Stewardship and Environmental Stewardship) – provided the Sustainable Farming Incentive standard they choose is compatible with their existing agreement and does not result in them being paid twice for similar activities.

We will publish clear guidance and make the application process as straightforward as possible to help people with Countryside Stewardship and Environmental Stewardship agreements identify which land is eligible for the standards.

For example, if you are already being paid for establishing a cover crop under a Countryside Stewardship option on land that is at risk of soil erosion or surface runoff, then you will not be able to also enter that same land into the Sustainable Farming Incentive arable and horticultural soils standard where similar activities are required. You may however be able to establish cover crops on land on other parts of your holding, where appropriate.

Similarly, where you have a grass buffer strip on an intensive grassland field, then you will not be able to enter this strip into the grassland soils standard, because this would result in being paid for similar activities. However, you could enter the rest of the parcel into the standard if you do not have other incompatible Countryside Stewardship options on it.

Between 2022 and 2024, the Sustainable Farming Incentive will run alongside existing schemes. Farmers will be able to choose which schemes to participate in and can participate in multiple schemes if they wish, but they will not be paid twice for similar activities.

Over time, we intend to extend the Sustainable Farming Incentive so that it is both accessible and applicable to a broader range of farmers. We will test and develop how to do this through the Sustainable Farming Incentive pilot and through our ongoing tests and trials. We will widen the eligibility of the Annual Health and Welfare Review to non-BPS claimants as soon as we have a delivery solution in place.

5.4 Timing

We plan to open applications for the Sustainable Farming Incentive in spring 2022 and we will make the first payments before the end of 2022.

Applications will be via a digital service on GOV.UK. We will be rigorously testing the service with a range of farmers and farm types. Simple checks will be undertaken to confirm eligibility for the scheme. There will be assistance for those without digital access or who need additional support to apply.

It takes time to develop the evidence to create new standards and payment rates and to test them with farmers and other experts. In this publication, we are presenting indicative standards and payment rates while we continue to refine our assessments and receive feedback from farmers and stakeholders. We will publish final versions of this initial set of standards by November 2021, ahead of launching the scheme in 2022.

Before finalising payment rates, we will be:

• conducting more engagement with farmers on the standards
• researching how many farmers are likely to sign up to the standards and whether that level of uptake is sufficient to meet our ambition for the scheme to achieve impact early in the agricultural transition period; and
• undertaking verification of our indicative payment rates, including independent review

5.5 The standards available from 2022

Within the Sustainable Farming Incentive, actions will be grouped into simple packages, set out as standards, with different levels of ambition. This is to make it as straightforward as possible for farmers to identify which standards, at what level, are best suited to their land and business.

The standards will normally be offered at three ambition levels: introductory, intermediate, and advanced. Offering a choice of ambition levels will enable farmers who are new to environmental management to join the scheme as well as those who are already undertaking sustainable farming activities.

Soils standards

The scheme will begin by offering two soils standards – an arable and horticultural soils standard and an improved grassland soils standard.

Through signing up to these standards, farmers will be rewarded for management practices that improve soil health by improving soil structure, soil organic matter, and soil biology. Farmers will undertake actions to maintain and improve the condition and structure of their soil to promote clean water, and improve climate resilience, biodiversity, and food production. This will contribute to a range of environmental and climate change outcomes, aiming to:

• reduce levels of sediment, nutrient, pesticide, and chemical pollution in water
• increase ground and surface water resources
• reduce flooding
• reduce compaction, erosion, and run-off
• reduce loss of water and organic matter
• reduce greenhouse gas emissions
• maintain or enhance carbon storage, water storage, and biodiversity

We expect that those who farm in the uplands, but below the moorland line^{[footnote 4]} , will be able to take up an arable and horticultural soils standard or an improved grassland soils standard on eligible land.

Moorland and rough grazing standard

Moorlands have huge potential to deliver a wide range of public goods, but they are many and varied. Through signing up to an introductory level of this standard, farmers will undertake actions to assess the range of habitats and features present on their individual moorlands. They will identify pressures on these assets and the risks posed by wildfires. This will contribute to a greater understanding of the potential of each moorland area to deliver public goods and directly feed into future elements of the Sustainable Farming Incentive and other schemes.

We are developing this introductory level moorland and rough grazing standard with farmers and stakeholders over the summer. We will finalise it, alongside a payment rate, by November 2021.

We plan to make higher levels of ambition available within this standard later in the transition. We are working with farmers and stakeholders to develop these and test them through the pilot.

This introductory level moorland and rough grazing standard will be available to all moorland farmers, including those in Countryside Stewardship. 75% of land in moorlands landscapes is already covered by agreements within existing schemes.

Farmers not already in existing schemes will also be able to apply for Countryside Stewardship, alongside participating in this Sustainable Farming Incentive standard if they want to deliver other actions in moorland areas. There are higher-tier, mid-tier and upland offers available under Countryside Stewardship to help support farmers in producing public goods in these important landscapes.

Countryside Stewardship will still be open for applications in 2022 and 2023, with the last agreements starting in 2024. We will then provide a straightforward way for farmers to enter their land into the new environmental land management schemes from 2025 onwards.

Annual Health and Welfare Review

As a first step on the Animal Health and Welfare Pathway, Defra will fund a yearly visit from a vet or vet-led team. Our intent is that this is a time limited offer for three years. We will review the effectiveness of the Annual Health and Welfare Review and consult on the need for further regulation.

This Annual Health and Welfare Review will help reduce endemic diseases and conditions within livestock, promote responsible use of veterinary medicines, improve welfare and increase farm productivity, and build on the strong relationships that exist between farmers and vets. Action taken as a result of the Annual Health and Welfare Review will contribute to government commitments on the responsible use of antimicrobials, as set out in the UK Anti-Microbial Resistance 5-year National Action Plan.

The Annual Health and Welfare Review will include diagnostic testing for priority diseases or conditions, and bespoke advice on health, welfare, biosecurity and the responsible use of medicines. As part of the review, farmers and vets will share data which will be used to better understand the health and welfare of the national herd and flock, and not for inspections.

The farmer and their chosen vet will agree a series of recommended actions after a detailed conversation about the farm, its practices and any known health and welfare concerns or opportunities. Where a health and welfare plan exists for a farm, this will be the initial place to start conversations between the farmer and their vet, with the review building upon those areas covered in the existing health and welfare plan.

The review will recommend actions to improve livestock health and welfare, agreed between the farmer and the vet, that will be a way of measuring yearly progress. It will also signpost more support available to the farm for making these improvements, including the upcoming grants to improve livestock health and welfare.

Testing will initially focus on identifying priority endemic diseases or conditions, in cattle, pigs, and sheep. These testing priorities have been co-designed with industry, to ensure we are focusing on health issues that matter to farmers, as well as delivering benefits for the public.

For cattle, we will initially test for Bovine Viral Diarrhoea (BVD), which is estimated to cost the industry around £14 million per annum and increases greenhouse gas emissions from cattle.

In pigs, our initial focus will be on Porcine Reproductive and Respiratory Syndrome virus (PRRS), which is estimated to cost the industry around £52 million per annum and increases antibiotic use. The approach could later be applied to other endemic diseases such as swine dysentery. For sheep, testing will start with parasitic resistance to anthelmintic treatments (drench testing), because this affects productivity and increases greenhouse gas emissions.

We want to build in flexibility to the review process to meet the needs of individual farmers. This means that although there will be some common aspects, they won’t look the same on every farm – this will particularly be the case for biosecurity and for the advice the vet gives to farmers. The review will aim to add value to existing practices and complement existing assurance schemes.

Summary of the review

The following elements are relevant to all commercial pigs, sheep, beef, and dairy keepers:

1. Collection of data for benchmarking against the national herd/flock picture and to mark progress on the farm.
2. A biosecurity review at a level of detail appropriate for the farm and recommend priority areas for action to improve biosecurity. This includes training, capital investment, and changes to farm management practice.
3. A review of medicines usage on farm and discussing responsible use of medicines. This includes uploading medicines usage to relevant e-medicines recording hub.
4. Written recommendations and monitoring, which will include a report from the review setting out priority recommendations to improve health and welfare, advice on how to monitor for change in issues identified, advice on how to record data as part of the review and signposts to further support to help with making changes

The diagnostic testing aspect of the review will vary by species.

The initial focus for testing for each species will be:

1. Pigs - testing for Porcine Reproductive and Respiratory Syndrome virus, with follow-up advice for those with a positive result.
2. Sheep - testing for anthelmintic resistance, in the flock, with recommendations on how to use anthelmintics appropriately, based on these results.
3. Beef and dairy - testing for Bovine Viral Diarrhoea, with follow-up advice for those that have a positive result.

How we have developed the scheme and standards so far

We have developed the Sustainable Farming Incentive scheme and standards through:

• input from a range of farmers and other experts including:
  • industry experts and livestock farmers to identify common topics for the Annual Health and Welfare Review to cover
  • workshops with geographically representative members of several Countryside Stewardship Facilitation Groups (CSFF)
  • workshops with ‘tests and trials’ farmer participants from a range of farm types
  • monthly meetings with the Environmental Land Management Engagement Group (EEG of around 30 stakeholders from environmental and agricultural backgrounds
• an in-depth review of science and practical experience around specific actions and the outcomes they can achieve

We plan to continue and widen that engagement over the summer to help us refine the standards ahead of the scheme launching in 2022. Those interested in taking part in future co-design activities on future farming can email ffcpcodesign@defra.gov.uk.

5.6 Payments and indicative payment rates

We have been developing new payment rates for the early rollout of the Sustainable Farming Incentive.

Alongside this document, we have published payment principles for environmental land management schemes, which outlines the principles and approach for developing payments for all future farming and wider environmental land management schemes.

The indicative payment rates for the first year are set out below, these rates will be subject to ongoing review.

We will update the indicative rates to reflect any changes to the standards as a result of engagement and feedback over the summer. We will finalise these standards and payment rates by November 2021, including a payment rate for the moorland and rough grazing standard which is currently under development.

Indicative payment rates for soil standards

Improved grassland soils (per hectare):

• introductory: £26
• intermediate: £44
• advanced: £70

Arable and horticultural soils (per hectare):

• introductory: £26
• intermediate: £41
• advanced: £60

Payments for Annual Health and Welfare Review

Annual Health and Welfare Review payments will go to the farmer, recognising their personal commitment to the review, and will cover the full cost of vet time and diagnostic testing. Payments are expected to range from approximately £269 to £775, varying by species. The main difference between payment rates will be due to the cost of testing, which varies across the different diseases, and whether farmers are already required to test for these diseases.

To ensure the payment rates for the soil standards best reflect the costs to farmers, we have used agricultural evidence from specialist consultancies and Natural England, as well as Defra’s Farm Business Survey. We have set payment rates, so they reflect an updated assessment of costs and income foregone and are financially viable for a greater proportion of the farming sector.

In setting the rates for the Annual Health and Welfare Review, we have used evidence from vets and used information from Defra’s Farm Business Survey.

We are gathering further evidence and testing payment rates with a range of farmers and farming types ahead of finalising the payment rates by November 2021. We will make the first payments through the Sustainable Farming Incentive before the end of 2022.

5.7 Monitoring

We recognise that for many farmers, the approach to monitoring agreements is crucial when deciding whether to participate, and that many farmers are put off by the risk of being disproportionately penalised for any non-compliance. We are planning a fundamental reset in our approach, using more innovative ways to check eligibility and monitor the delivery of agreements.

Our approach needs to ensure long-term value for money through the delivery of sustainable environmental, climate and animal health and welfare benefits at scale, without causing undue stress or risk for those participating in our schemes. We don’t want those who are implementing scheme agreements in good faith to have to worry about being disproportionately or unfairly penalised, but we do need to make sure that there is no fraud, misuse of public funds or damage taking place. We want to focus on outcomes and supporting improvement, rather than immediately penalising minor shortcomings - while at the same time ensuring public money is properly safeguarded.

We are testing a range of approaches for monitoring and have already made improvements to the way we monitor agreements within existing schemes, to make them fairer and more proportionate. We plan to use remote monitoring and run physical and virtual site visits on a proportion of farms in Sustainable Farming Incentive scheme agreements from 2022.

Instead of focusing on whether detailed measurements and prescriptions have been followed, as we have done in the past, we will work in partnership with farmers and offer guidance to support improvements. However, there may be cases where, for example, action may be taken to include withholding payments or recovering money. This will normally be reserved for cases where there has been significant or systemic failure to implement an agreement, misuse of public money or fraud.

5.8 Developing the scheme between 2022 and 2024

Further standards

We plan to add more standards into the scheme between 2022 and 2024. We will select and amend standards based on factors including:

• their potential contribution to our overall goals relating to climate change, environment and animal health and welfare - prioritising standards that make the most significant contribution to environmental, climate and animal health and welfare outcomes, and those that contribute to multiple outcomes, because these represent the best value for public money
• their fit with existing and transitional environmental and animal health and welfare offers currently available; the Sustainable Farming Incentive will not be operating in isolation and we need to consider how different schemes complement one another and avoid creating perverse incentives
• how each standard helps to extend opportunities to more types, locations, and sizes of farm to be rewarded to produce public goods on their land moving towards our ambition to extend the scheme so that it is both accessible and applicable to a broader range of farmers
• our confidence that the standard is ready for larger-scale adoption – we will build this confidence through our tests, trials, and pilot work as well as wider engagement with farmers and other experts
• simplicity of delivery for farmers and delivery partners - above all we need the scheme to work for all concerned

The payment principles for environmental land management schemes, published in parallel with this update, set out in more detail how we plan to approach setting payment rates across all environmental land management schemes.

We are testing and reviewing a wider set of standards, to assess their suitability in the Sustainable Farming Incentive. Where we conclude that they are suitable, we will decide the best timing to introduce them as the scheme expands. This set of standards under active consideration are:

• agroforestry standard
• hedgerows standard
• arable and horticulture land standard
• waterbody buffering standard
• improved grassland standard
• low and no input grassland standard
• farm woodland standard
• dry stone walls standard
• heritage standard
• farmyard infrastructure standard
• orchards and permanent crops standard
• peat soils standard

The Animal Health and Welfare Pathway

We are continuing to work with the livestock industry (including vets), to co-design our approach - resulting in better policy development and strong industry support for the pathway. The pathway will:

• gradually build a picture of the health and welfare of our national herd and flock
• help farmers to control endemic diseases and conditions across England
• support the production of animals to higher welfare standards

Flexibility is a key part of the Annual Health and Welfare Review’s design – every farmer will have unique concerns and need a tailored approach and we want to build in flexibility for the priorities of individual farmers. We will be launching other components of the pathway soon. We will be offering financial support to farmers - animal health and welfare grants, endemic disease support and piloting payment-by-results – and progressing our commitments to strengthen the regulatory baseline and consult on animal welfare labelling.

Land management plans

Our tests and trials are producing excellent evidence on the role that land management plans could play in our schemes, which we intend to learn from. Our aim is that, eventually, the Sustainable Farming Incentive will involve each farm having a land management plan.

This would be the basis for farmers to decide how, where and when to produce public goods on their land. We would then be able to use these plans as a basis for assessing overall progress towards our wider environmental, climate, and animal health and welfare targets.

Earned recognition

We are exploring how membership of existing assurance schemes might play a role in providing earned recognition for farmers with Sustainable Farming Incentive agreements. Earned recognition provides an opportunity for farmers to become ‘trusted partners’ and benefit from reliably demonstrating delivery and adherence to assurance scheme standards – for example, reducing the likelihood of being visited to monitor and review the delivery of their agreement.

We are working closely with the farm assurance schemes and looking at the concept of earned recognition across Defra as a whole - beyond the environmental land management schemes. We plan to use the Sustainable Farming Incentive pilot to trial and evidence how earned recognition could operate for the scheme.

Agreements: length and flexibility

We are designing the scheme to make it accessible to all farmers and, as part of this, we are looking at flexibility in agreements and lengths.

We want to make sure that those who have control of the land for more limited periods of time, such as tenants, are able to fully participate. We know that farmers have different preferences about agreement length, with some preferring annual agreements which reflect the yearly cycles of decision-making, rotation and some tenancies.

We know that others prefer the security of a longer agreement covering several years. Through the Sustainable Farming Incentive pilot, we are testing these longer “multi annual agreements”, where that is appropriate to the actions involved in the standard.

We also want to make sure that those farming on common land are able to participate. Following engagement with stakeholders, our view is that a group agreement is likely to be needed to enter common land into the Sustainable Farming Incentive. We are working on the details of how these group agreements could work in practice. We will continue to work closely with stakeholders and will provide more information in due course. We have heard from farmers that flexibility to adjust the content of agreements is important. We will be working with farmers through our pilot and in our wider engagement to understand the best ways of achieving this flexibility, whilst also securing environmental outcomes and value for money. We are also working on ways to make it straightforward for a farmer to roll over an agreement if they wanted to do so.

The approach to monitoring and compliance

We will continue to develop our approach to monitoring to make it fairer, more targeted, more proportionate and more effective. This includes ensuring that the support, communication and guidance we provide for farmers continues to improve as a result of that feedback and learning.

Some aspects we will be testing and learning are:

• how we can achieve a more targeted approach to monitoring agreements and get the right balance between use of existing data, remote monitoring, and virtual and physical site visits
• the effectiveness of more innovative approaches such as remote monitoring and virtual site visits (conducted via video call) and farmers’ experience of these approaches
• what is relevant and proportionate evidence for each of the standards, and what works best for farmers in practice.
• how guidance and other communications can best support delivery of the standards
• how self-declaration can be used as part of monitoring agreements, including its effectiveness and farmers’ experience of submitting an annual declaration

6. Taking a fair and consistent approach to payments

We will ensure that, as far as possible, agreement holders receive the same amount of money for comparable activities across the different schemes that will be available between 2021 and 2024. We will achieve this through scheme design and how we set rates.

We are looking at Countryside Stewardship revenue payment rates as part of this. Our understanding of how costs and income foregone has changed since revenue rates were set in 2013. We will adjust existing and new Countryside Stewardship rates where we believe they have changed.

We are applying this review to existing agreements because we made a commitment to those applying for Countryside Stewardship agreements that were signed while the UK was in the EU, that they would not be unfairly disadvantaged.

As well as Countryside Stewardship agreements, these changes will apply to schemes that are based on Countryside Stewardship rates (revenue only), namely the:

• Farming in Protected Landscapes programme
• England Woodland Creation Offer (maintenance payments)
• Sustainable Farming Incentive pilot
• Local Nature Recovery pilot

We will confirm the changes to Countryside Stewardship payment rates later in 2021 in advance of payment rates being adjusted before 2022 claims.

Payments within the Sustainable Farming Incentive will have a different basis, more fully reflecting the principles set out in the ‘Payment principles for environmental land management schemes’ document. These principles will also apply to all Defra environmental land management schemes (not just those in the Future Farming and Countryside Programme).

We are not amending Environmental Stewardship payment rates. On average, across an agreement, revenue payments are higher in Environmental Stewardship than in Countryside Stewardship. Environmental Stewardship agreement offers continue to provide important environmental benefits.

We will continue to extend Environmental Stewardship agreements where they are meeting their objectives and they expire before 2024. Environmental Stewardship agreement holders whose agreements expire can also apply for Countryside Stewardship. In both cases, agreement holders will be able to progress into the new environmental land management schemes when they are offered a place without penalty.

The England Woodland Creation Offer, launched in June 2021, is designed to significantly increase rates of woodland creation to meet our environmental targets. Grant rates for woodland creation are higher than in the Countryside Stewardship Woodland Creation Offer and we are therefore expecting to close the Countryside Stewardship woodland creation offer to new entrants in the near future but retain the Woodland Creation Maintenance offer until 2024 when all Countryside Stewardship schemes are phased out for new entrants.

We are working with applicants and agreement holders of the Countryside Stewardship Woodland Creation and maintenance scheme this year to help them apply for the England Woodland Creation Offer, where appropriate. Like Environmental Stewardship and Countryside Stewardship agreement holders, England Woodland Creation Offer agreements holders will be able progress without penalty into the new environmental land management schemes, when they are offered a place.

7. Forward look of environmental land management schemes

7.1 Environmental land management schemes

• Tests and trials – started 2018, continuing over the transition period
• Sustainable Farming Incentive – pilot applications opened in 2021. Piloting will continue over the transition period. The early rollout of the scheme begins in 2022. Learning from rollout, piloting and implementation will be ongoing as the scheme expands between 2022 and 2024
• Local Nature Recovery – piloting starts 2022, phased rollout from 2023
• Landscape Recovery – piloting starts in 2022, phased rollout from 2024
• Farming in Protected Landscapes – started in 2021 and ends in 2024
• England Woodland Creation Offer – started in June 2021 and ends in 2025. This will then lead into future environmental schemes
• Tree Health pilot – pilot applications open from August 2021 and the pilot ends 2024. Existing Countryside Stewardship Woodland Tree Health grants ongoing until 2024. These will both lead into future environmental schemes
• Countryside Stewardship agreements, Wildlife Offers and Capital Grants – applications open annually until 2023 for 2024. Countryside Stewardship will close for new applications in 2023 and lead into future environmental schemes
• Animal Health and Welfare pathway – applications open from 2022
• Slurry Investment Scheme – applications open from 2022

7.2 New prosperity and productivity funding

• Future Farming Resilience Fund – applications open from 2022 and Fund ends in 2024
• Farming Investment Fund – applications open from 2021 and Fund ends in 2024 (to be confirmed)
• Innovation Research and Development scheme – applications open from 2021, continuing over the transition period
• New Entrant Support Scheme – applications open from 2022 and end in 2024

7.3 Direct payments, lump sums and delinking

• phase-out of direct payments – reductions start in 2021 and the phase-out will be complete in 2027
• lump sum exit scheme – the consultation period will end August 2021, with applications open during 2022
• delinked payments – the consultation period will end August 2021; delinking payments will start in 2024 and end in 2027

1. Estimates sourced from ongoing Defra funded project: Delivering Clean Growth through Sustainable Intensification. Policy is still under development and so these estimates are subject to change. ↩ ↩²

2. Estimates calculated from UK data on GHG emissions from all passenger cars (CO2e) and all licensed cars (inclusive of all fuel types) in 2019. ↩

3. Commercial holdings are those with at least one of the following: more than 20 sheep, more than 10 cattle, more than 50 pigs. This is the definition used in the June Survey of Agriculture and Horticulture, England. ↩

4. The Moorland Line encloses land within England which has been defined as predominantly semi-natural upland vegetation, or predominantly of rock outcrops and semi-natural vegetation, used primarily for rough grazing. ↩