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GETTING TO ZERO

Greener Pastures

Securing the economic and environmental future of Britain’s farms
Ned Hammond, Adam Hawksbee
December 16, 2023
Greener Pastures

“During my time at Defra, I was always clear that there should be an iterative approach. We knew we wouldn’t get everything right in the first go and should refine and modify the policy by learning from experience. Onward’s new publication, Greener Pastures, is a great contribution to that vibrant debate now taking place about agriculture, food security, land use and nature’s recovery.”

England’s farmers face twin economic and environmental challenges. Two-fifths earn less than £25,000 a year, and 15% make a loss. Food exports have fallen by 13% since Brexit. Farms are responsible for polluting more rivers and lakes than water companies. Agriculture’s emissions have only dropped by 2% since 2010 despite almost every other sector reducing by at least a tenth. Too many farms are poor and polluting, fuelling food insecurity and environmental decline.

Five root causes are driving these problems. Farmers have faced the wrong incentives under the EU’s Common Agricultural Policy, encouraging unsustainable farming at the expense of nature. Private finance to fund nature’s recovery and lock up carbon has yet to be unleashed, and low investment in machinery and technology has kept productivity down. Aspiring young farmers can’t secure the experience, land, or finance to get started. Supermarkets are squeezing farmers, and trade deals aren’t being harnessed to support British agriculture. 

Onward’s new paper, Greener Pastures, makes nine recommendations to put English farming on a sustainable footing. If the Government’s nature-friendly subsidies are going to attract enough farmers, they need to be more generous and less bureaucratic. Offering bonuses to the most ambitious farmers undertaking green action on most of their land, restoring farms’ inheritance tax exemption, and trialling a new regenerative farm subsidy would encourage greater environmental ambition and boost farm profits.

There is also a political reward for adopting these proposals, addressing farmers’ frustrations with farm subsidy reform and public concern over water pollution. Greener Pastures warns that these issues could threaten the Conservatives’ electoral dominance in the English countryside. In 2019, the party won 98 of England’s 100 most rural seats, but Onward’s new analysis shows they are on course to lose 35, with Labour set to win 33 unless the party can restore trust in rural communities. 

Root causes behind farming’s economic and environmental challenges

Farmers have faced the wrong incentives. Under the EU’s Common Agricultural Policy (CAP) farmers were originally subsidised to produce food, leading to intensification of agriculture and the removal of natural features to maximise yields. CAP reforms in the 1990s and 2000s removed some of the distortive effect but did not do enough to promote environmental protection. The new Environmental Land Management schemes (ELMs) have improved the incentives but low payment rates and bureaucracy are putting many farmers off applying.

Farmers have not been encouraged by the private sector to produce environmental goods. Private finance markets for domestic nature-based carbon and biodiversity credits are starting to emerge. This is prompted by companies and individuals choosing to offset their emissions, meaning they pay for tree planting or nature restoration projects. But less than 3% of UK woodland and below 1% of peatland are currently used for carbon credits. Farmers are wary of producing and selling credits because the markets are underdeveloped.

Investment in infrastructure and new technology has been too low. Limited spending on machinery, equipment and infrastructure hinders productivity but also leads to environmental damage, such as water pollution. New technologies could address agriculture’s emissions and resilience problems, and provide growth opportunities for the industry. The Department for Environment, Food and Rural Affairs (DEFRA) has begun to tackle this with the Farming Investment Fund and Farming Innovation Programme but these initiatives are not dealing with some significant environmental problems.

Communities underpinning farming are not being fostered. Not enough farmers are being given the financial backing they need to support each Greener Pastures other with environmental challenges. Only 6,000 out of over 100,000 farmers in England are in cluster groups. And farm succession is becoming a challenge. In previous generations this simply involved a family transition. But that continuity is disappearing and potential young farmers cannot secure the necessary experience, land or finance.

Domestic and international relationships are not being harnessed for the good of farmers. Large supermarkets and food manufacturers can change the price and volume of their orders at the last minute without consequence. This hits farmers’ profits and creates uncertainty about production, which leads to 1.6 million tonnes of food waste each year. Brexit has resulted in substantial barriers to exports to the EU. And trade deals with Australia and New Zealand are detrimental to some British farmers.

Recommendations

1. Deliver a five-point plan to make ELMs work for farmers and the environment. 

1.1 Offer bonus payments to farmers to carry out environmental actions on more of their land.

1.2 Run a trial of Countryside Stewardship multi-year options for the transition to and maintenance of regenerative farming.

1.3 Create an integrated “Environmental Land Management Advice Service” and give the Rural Payments Agency a short-term funding boost to improve IT systems.

1.4 Enlist third-party organisations to deliver more higher tier Country Stewardship and Landscape Recovery agreements.

1.5 Amend agricultural property relief to include land that has undergone nature restoration.

2. Develop accounting, regulatory and pricing frameworks to underpin well-functioning private nature markets.

2.1 Develop mandatory standards for private biodiversity and soil carbon credits.

2.2 Create the “Nature Credits Bank” for nature-based carbon and biodiversity credits.

3. Direct innovation spending to capitalise on four key areas of environmental and economic opportunity. 

3.1 Fund innovation in methane suppressing feed additives, approve their use and mandate the inclusion of additives in feed once product choice is available to farmers.

3.2 Create an innovation cluster for plant-based and fermentation-made proteins centred in a new Investment Zone in North Yorkshire.

3.3 Create a low emission peatland farming innovation centre, and fund the development of machinery and equipment.

3.4 Fund gene editing research that widens crop varieties, and accelerate secondary legislation for gene edited products.

4. Increase grant funding and reduce planning barriers to tackle water pollution and enhance climate resilience.

4.1 Continue Slurry Infrastructure Grant funding after upcoming rounds and introduce a Farming Transformation Fund grant for poultry manure fertiliser production systems.

4.2 Increase Water Management Grant funding and introduce a Farming Transformation Fund grant for controlled environment agriculture facilities that use renewables or waste heat.

4.3 Reduce planning barriers for slurry stores and on-farm reservoirs.

5. Remove the barriers to accessing the Farming Investment Fund so more farmers can improve productivity and environmental performance.

5.1 Offer interest free loans to farmers accessing Farming Investment Fund grants.

5.2 Update the Farming Equipment and Technology Fund to include drones and more sophisticated GPS systems, and allow the purchase of second hand equipment.

6. Bring farmers together to tackle environmental challenges by expanding the number of cluster groups.

7. Support the next generation by increasing the number of county farms, introducing a land mobility programme, and financing access to agricultural land – and complete implementation of the Rock Review recommendations.

7.1 Provide £30 million annual funding for councils to purchase land for county farms and incorporate regenerative agriculture training.

7.2 Launch a Land Mobility Programme to bring older farmers and potential successors together.

7.3 Offer young farmers new financing options to access agricultural land.

8. Expand the Groceries Code Adjudicator’s powers and trial new contracts that increase certainty for farmers.

8.1 Expand the Groceries Code Adjudicator’s powers to more effectively support farmers.

8.2 Trial new supermarket contracts that increase certainty for farmers.

9. Negotiate a veterinary agreement with the EU to reduce barriers to exporting food.

Root causes behind farming’s economic and environmental challenges

Farmers have faced the wrong incentives. Under the EU’s Common Agricultural Policy (CAP) farmers were originally subsidised to produce food, leading to intensification of agriculture and the removal of natural features to maximise yields. CAP reforms in the 1990s and 2000s removed some of the distortive effect but did not do enough to promote environmental protection. The new Environmental Land Management schemes (ELMs) have improved the incentives but low payment rates and bureaucracy are putting many farmers off applying.

Farmers have not been encouraged by the private sector to produce environmental goods. Private finance markets for domestic nature-based carbon and biodiversity credits are starting to emerge. This is prompted by companies and individuals choosing to offset their emissions, meaning they pay for tree planting or nature restoration projects. But less than 3% of UK woodland and below 1% of peatland are currently used for carbon credits. Farmers are wary of producing and selling credits because the markets are underdeveloped.

Investment in infrastructure and new technology has been too low. Limited spending on machinery, equipment and infrastructure hinders productivity but also leads to environmental damage, such as water pollution. New technologies could address agriculture’s emissions and resilience problems, and provide growth opportunities for the industry. The Department for Environment, Food and Rural Affairs (DEFRA) has begun to tackle this with the Farming Investment Fund and Farming Innovation Programme but these initiatives are not dealing with some significant environmental problems.

Communities underpinning farming are not being fostered. Not enough farmers are being given the financial backing they need to support each Greener Pastures other with environmental challenges. Only 6,000 out of over 100,000 farmers in England are in cluster groups. And farm succession is becoming a challenge. In previous generations this simply involved a family transition. But that continuity is disappearing and potential young farmers cannot secure the necessary experience, land or finance.

Domestic and international relationships are not being harnessed for the good of farmers. Large supermarkets and food manufacturers can change the price and volume of their orders at the last minute without consequence. This hits farmers’ profits and creates uncertainty about production, which leads to 1.6 million tonnes of food waste each year. Brexit has resulted in substantial barriers to exports to the EU. And trade deals with Australia and New Zealand are detrimental to some British farmers.

Recommendations

1. Deliver a five-point plan to make ELMs work for farmers and the environment. 

1.1 Offer bonus payments to farmers to carry out environmental actions on more of their land.

1.2 Run a trial of Countryside Stewardship multi-year options for the transition to and maintenance of regenerative farming.

1.3 Create an integrated “Environmental Land Management Advice Service” and give the Rural Payments Agency a short-term funding boost to improve IT systems.

1.4 Enlist third-party organisations to deliver more higher tier Country Stewardship and Landscape Recovery agreements.

1.5 Amend agricultural property relief to include land that has undergone nature restoration.

2. Develop accounting, regulatory and pricing frameworks to underpin well-functioning private nature markets.

2.1 Develop mandatory standards for private biodiversity and soil carbon credits.

2.2 Create the “Nature Credits Bank” for nature-based carbon and biodiversity credits.

3. Direct innovation spending to capitalise on four key areas of environmental and economic opportunity. 

3.1 Fund innovation in methane suppressing feed additives, approve their use and mandate the inclusion of additives in feed once product choice is available to farmers.

3.2 Create an innovation cluster for plant-based and fermentation-made proteins centred in a new Investment Zone in North Yorkshire.

3.3 Create a low emission peatland farming innovation centre, and fund the development of machinery and equipment.

3.4 Fund gene editing research that widens crop varieties, and accelerate secondary legislation for gene edited products.

4. Increase grant funding and reduce planning barriers to tackle water pollution and enhance climate resilience.

4.1 Continue Slurry Infrastructure Grant funding after upcoming rounds and introduce a Farming Transformation Fund grant for poultry manure fertiliser production systems.

4.2 Increase Water Management Grant funding and introduce a Farming Transformation Fund grant for controlled environment agriculture facilities that use renewables or waste heat.

4.3 Reduce planning barriers for slurry stores and on-farm reservoirs.

5. Remove the barriers to accessing the Farming Investment Fund so more farmers can improve productivity and environmental performance.

5.1 Offer interest free loans to farmers accessing Farming Investment Fund grants.

5.2 Update the Farming Equipment and Technology Fund to include drones and more sophisticated GPS systems, and allow the purchase of second hand equipment.

6. Bring farmers together to tackle environmental challenges by expanding the number of cluster groups.

7. Support the next generation by increasing the number of county farms, introducing a land mobility programme, and financing access to agricultural land – and complete implementation of the Rock Review recommendations.

7.1 Provide £30 million annual funding for councils to purchase land for county farms and incorporate regenerative agriculture training.

7.2 Launch a Land Mobility Programme to bring older farmers and potential successors together.

7.3 Offer young farmers new financing options to access agricultural land.

8. Expand the Groceries Code Adjudicator’s powers and trial new contracts that increase certainty for farmers.

8.1 Expand the Groceries Code Adjudicator’s powers to more effectively support farmers.

8.2 Trial new supermarket contracts that increase certainty for farmers.

9. Negotiate a veterinary agreement with the EU to reduce barriers to exporting food.

In a foreword, George Eustice, former Environment Secretary, commented:

During my time at Defra, I was always clear that there should be an iterative approach. We knew we wouldn’t get everything right in the first go and should refine and modify the policy by learning from experience. Onward’s new publication, Greener Pastures, is a great contribution to that vibrant debate now taking place about agriculture, food security, land use and nature’s recovery.

“There are some good proposals that are in line with internal work that Defra has been working on for some time, such as creating a market in biodiversity credits, developing a role for accredited private groups and charities to help deliver schemes, grants for slurry management and new technologies such as methane inhibitors in feeds and fertilisers made from wastes.”

Ned Hammond, Onward’s Head of Energy and Environment, commented:

“England’s farmers are in trouble. They’re being squeezed by supermarkets and high fertiliser costs, and all the while, their farms are polluting our environment. They can’t afford to go green, but Britain can’t afford for them not to.

“Nature-friendly farm subsidies can put farming back on a sustainable footing. But too few farmers are enrolling in the schemes because they aren’t generous or simple enough.

“Our five-point plan would reward the most ambitious, protect nature-restoring farmers’ inheritance tax exemption, and simplify the bureaucracy to help to secure the future of our farms.”

Selaine Saxby, MP for North Devon, commented:

“Nature-friendly farm subsidies are critical to reaching net zero, tackling water pollution and boosting biodiversity. But they only work if we can also help make farming more profitable. Onward’s proposal to reward the greenest farmers is a sensible idea to encourage more to deliver environmental action on their land.

“I have already been contacted by constituent farmers who having engaged in nature recovery programmes are concerned that they now potentially face a potential inheritance tax bill as a result of their good work. Exempting farms undergoing nature restoration from inheritance tax is fair and would put them on a level playing field with other responsible farmers.”

Martin Lines, Chair of the Nature Friendly Farming Network, commented:

“We welcome the publication of this report which sets out in forensic detail the many challenges facing domestic farming and land management. It makes clear that our environmental and economic challenges are interlinked and must be addressed as so. It provides a useful contribution to the debate on how we can use land well, to build a sector that is fairer, more resilient and genuinely sustainable.”

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