The importance of farming to our regional economy has featured in many recent reports. Whilst the contribution this sector makes to the overall size of our economic output is modest in relation to turnover, the actual impact is huge and affects many parts of our business and social fabric.
The best way to illustrate this is by reference to what we learned during Foot and Mouth in 2002. We discovered then how quickly the closure of the countryside triggered a systemic shock wave which rapidly rippled out to many aspects of rural life and equally quickly had a knock-on effect in many of our towns and villages. It was estimated that for every farm that was locked down the impact was felt by at least twenty-five external businesses. Our tourist trade suffered a huge blow as did many of our High Streets.
Since 2002 the fortunes of the farming industry have ebbed and flowed depending upon the prevailing weather and latest Government Policy. Brexit was a game changer with many convinced that leaving Europe would free us of mountains of red tape and allow more targeted funding to support primary food production. Leaving Europe however exposed the risk of disturbing long established trading relationships. The transition was always bound to create market turmoil.
There were brave words from Government about this opening up free trade deals around the world. Following the recent example of this with Australia, it has quickly become clear that this had been poorly thought through and has been of doubtful value to our farming industry. It has also become clear that world trade deals were going to be difficult to achieve, particularly with the Trump “roulette wheel” approach to global financial markets. Perhaps, in order recoup the 5-6% trade we have lost, we might be better rewarded by reestablishing agreements with near Europe which remains by far our biggest market.
Government policy, as delivered by the previous administration, was broadly well aligned to this sector and the rural economy. Replacement of European Funding, which had been a rich source of financial support, was superseded by a National Basic Farm Payment scheme which, on paper, was equivalent to the lost EU package. The then Government were mostly in-step with the sentiment of the rural economy and well-motivated to support the industry particularly to ensure that the UK remained self-sufficient in food production.
That said, they embarked on a policy which triggered probably the biggest transition in financial backing since the Second World War. The payment of subsidies to farmers moved from the previous payments designed to offset the desire for cheaper food by compensating farmers for “income forgone” to a very different concept of payments based upon “public money for public goods”. Thus, was borne the new Sustainable Farming Incentive (SFI) and the Countryside Stewardship (CS) scheme designed to improve and protect the environment, support food production, and improve productivity for the benefit of all. It was still the case that the prime purpose of farming remained the production of food, a recognition that the UK is less than 60% self-sufficient in feeding itself and that without the support of farmers a lot of potential greening and environmental enhancement could not be achieved.
In parallel with this, Local Authorities undertook many of their own initiatives. Both our District Councils have been market leaders and through organisations like North Devon+ delivered highly successful programmes such as the Rural Business Grant Scheme which has had major benefits. To this day they continue to deliver farm support programmes which help to improve financial margins and inspire confidence to invest for the future.
A major complication which has further disrupted this market is the increasing imbalance between number of purchasers of farms who are genuine farmers and those (non-farmers) buying for other reasons such as tax benefits and increasingly to attract biodiversity net credits. In 2023, for example, 56% of farmland was acquired by non-working farmers. The motivation here is rapidly changing, being less driven by lifestyle choices and with many more piling in responding to the need to address environment legislation. This includes many Institutions and major corporates (particularly those with petrochemical facilities).
Events since the General Election have proved increasingly worrying with a growing concern that this Government is not in step with the world of farming and is more concerned about the topical issues most of interest to its core (mainly urban) supporters together with a relentless drive to squeeze out food price inflation whatever the consequences of this might be to UK producers.
It was clear that a perfect storm was brewing following a prolonged period of wet weather in 2024 which caused major flooding and rendered many mainstream farming processes impossible. The Whitehall response should have been seen as clear recognition as to what was to come. Comforting words but little practical action.
Since then, there have been a series of negative policy announcements which have shaken the industry to the core. The damaging changes to Inheritance Tax have undermined the confidence of many to remain in what is a generational business. The Government have failed to quell the real anger regarding this. Parliament Square has learnt at its cost how disruptive and noisy tractors can be.
The latest announcements regarding funding have come out of the blue and will further compromise this fragile and marginal industry. For many this reinforces the conviction that this Government does not understand the rural economy and most certainly does not appreciate the ripple effect it has throughout virtually every aspect of life outside major cities.
The government’s announcement on 11 March, which effectively closed the sustainable farming incentive (SFI) 2024 to new applications, was a complete surprise to all stakeholders.
Following its decision to cut the Basic Payment Scheme (harder and faster than expected), the immediate withdrawal of the SFI scheme, promoted to help offset those cuts, comes as a body blow to many businesses. Results from a recent National Farmers Union survey showed farm business confidence is now at an all-time low. Defra’s latest action will not help to build back the confidence and trust in government policy so badly needed in the farming industry if it is to engage and move forward positively.
In its defence, Defra says over 37,000 SFI agreements are currently in place. 800,000 hectares of arable land is now farmed without insecticides, 280,000 hectares of low input grassland is being managed more sustainably, and 75,000 kilometres of hedgerows are actively managed. While Defra has confirmed a reformed version of SFI is on the horizon, details will not be provided until the Spending Review. Therefore, we will have to wait until late autumn 2025 for the next version, although we know it won’t be open for applications until 2026. We also know that spending cuts will be a major priority.
SO, WHAT DO WE KNOW SO FAR?
Current holders of SFI agreements will continue to receive payments as per the terms of their agreement – in some cases for up to three years. If an applicant has been offered an SFI agreement but has yet to accept, this will need to be accepted in the next ten working days starting from 11 March, or the offer will be withdrawn.
If an application for an SFI agreement was submitted before applications were closed, but an offer had not yet been received, an agreement will still be offered if the application is deemed eligible. Any applications that were in progress but not submitted before the scheme was closed will not be eligible for submission. The exceptions are: applications that were delayed due to systems failure, those who requested “assisted digital” support from the RPA, and ex-SFI pilot farmers, whose pilot agreement has ended but they haven’t yet applied for the full SFI24 offer on land which was in the pilot agreement. Those with active SFI pilot agreements will be able to apply for SFI24 once their agreement has ended.
Defra has set out how the £5 billion farming budget is spent over a two-year period. Despite being promoted as Defra’s flagship scheme, SFI receives only 21% of the farming budget (£1.05 billion), with the largest slice apportioned to Higher Level Stewardship and Countryside Stewardship agreements. Recent announcements confirmed that capital grants will be opening again this summer and Defra is continuing to invest in the Farming Innovation Programme (FIP) and the Farming Equipment and Technology Fund (FETF).
POTENTIAL IMPACT?
The cessation of the SFI24 may encourage many farmers to review business plans and current land use and choose to switch some or all activity from environmental protection and recovery back to agriculture in order to maximise output and fill the funding gap. One farmer who was waiting to liaise with his agronomist before pressing send on an application is now looking at taking 70 hectares of land used for environmental protection and recovery and returning it to arable cropping.
THE FUTURE?
The previous government was working on mobilising green investment with the 2023 Green Finance Strategy, which confirmed that in order to achieve environmental targets and decarbonisation by 2050 (at the time of the strategy), this would require “a step change in levels of investment”. We therefore need to understand where Defra is in continuing this work to mobilise green investment – an opportunity to really engage private finance in the sector. While we wait for more detail around exemptions and current applications and what SFI25 will look like, we ask Defra to bear in mind the collaboration and co-operation required with the farming community for the successful development of frameworks and strategies due out later this year: the National Food Strategy, Land Use Framework and the 25-year Farming Roadmap. These strategies and frameworks could provide the direction of travel the industry needs to start rebuilding that lost confidence and driving forward a flourishing and thriving sector.
Whatever the outcome of these negotiations might be, it is critical that we recognise how all our businesses are somehow linked to a successful farming future. Even the smallest level of support is helpful such as BUYING LOCALLY.