Industry leaders have warned farmers will face ‘major financial hardship’ during the transition away from direct payments, with Defra planning to maintain the income foregone payment model for the foreseeable future.
The alarm was sounded after Gavin Ross, Defra’s Environmental Land Management (ELM) deputy director, confirmed payment rates both for the ‘stepping stone’ scheme from BPS – the Sustainable Farming Incentive – and the new ELM scheme pilot would be calculated using the existing approach.
Two different groups of academics and experts were commissioned by Defra some time ago to look at alternative payment models, but Mr Ross said their ‘interesting ideas’ were not able to be developed over the transition timescale set by Ministers.
He also declined to say how long it would take to move away from the income foregone plus costs incurred approach, describing it as a ‘hard challenge’ because it is ‘breaking into new territory’.
Speaking during the CropTec Show policy seminar, held this week on November 25, Mr Ross said: “We do want to move to paying for outcomes, but we are faced with the practical need to get something which works as best it can from the outset.
“The challenge of finding a payment mechanism which rewards outcomes, some of which are very difficult to measure, particularly on a farm basis, or can only be seen over a number of years, has just proven too challenging in the timescale, but it remains where we want to go.”
Defra is currently carrying out tests and trials using the payment by results method, and is also considering updating the baseline upon which income foregone and costs are calculated in order to make it a more attractive proposition.
Dr Julia Aglionby, executive director of the Foundation for Common Land (FCL), has written to the Prime Minister to warn of the ‘impending car crash’, which she estimates will leave 14,000 farms at risk of being loss making or earning less than half the national minimum wage by 2024, when direct payments will have been slashed by at least 50 per cent.
“After four years of planning at Defra, it beggars belief we will still be stuck with income foregone,” she said.
“This is a major disappointment after endless talk of the natural capital approach where much research has been undertaken and figures are available.
“The reality is natural capital payments cost more – perhaps they were rejected by the Treasury who said income foregone would be cheaper and avoid the amber WTO box. Sticking with income foregone will particularly hit those farming the uplands and common land as their margins and returns are low.”
Tenant Farmers Association (TFA) chief executive George Dunn said farmers had accepted the move away from direct payments on the basis they would be properly rewarded for providing public goods.
“Using income foregone, while sequentially removing BPS payments, will lead to major financial hardships for farm businesses,” he added.
CLA president Mark Bridgeman warned payments would need to be attractive to ensure widespread uptake of ELMs.
“Historically, income forgone and costs incurred has been based on averages,” he said.
“But for too many farmers this did not offer a payment which made economic sense. To achieve high levels of uptake, it will need to be increased so there is recognition of what is being delivered on an environmental scale.
“Natural capital valuations are one way of capturing this, but they still require development before they can be used in ELMs.
“More research is needed from Defra, sooner rather than later, to make sure payment rates bring in enough for farmers and land managers to achieve the Government’s environmental objectives.”
To watch the interview with Gavin Ross in full, visit www.croptecshow.com