ELMS – SUSTAINABLE FARMING INCENTIVE

  • Written by Andrew Davis
  • Posted on Jul 21, 2022
  • Articles

The flagship of the Government’s farming and countryside policy now we have left the Common Agricultural Policy is the Environmental Land Management Scheme (ELMS). Many years in development and still far from complete, it has attracted much criticism in many quarters. Farmers complain that there is far too little emphasis on food production, especially at this time of high inflation, whilst environmentalists claim that the conservation targets are far too weak. A cynic might suggest that, with such competing claims, the policy strikes the right balance!

The first element of ELMS, the Sustainable Farming Incentive, opened for applications on 30th June. Applications are online and said to be simple with a continuous approach rather than application windows, which should reduce the time it takes to process applications and issue contracts. The contract will last for an initial three years and further options can be added as they become available. It is hoped to have a 70% uptake by farmers by 2028, similar to the participation in the Entry Level Scheme of Environmental Stewardship that ran from 2005 to 2014.

The structure is interesting with a number of standards, each of which has three levels, introductory, intermediate and advanced. At this initial stage, applications are being invited for only three: arable and horticultural soils, improved grassland soils and moorland and rough grazing with only the introductory and intermediate levels on offer at present. The arable soils standard, for example, involves a soil assessment leading to a soil management plan annually; organic matter testing every five years; organic matter to be added at least every three years such as manure, chopped straw or cover crops; and 70% of land must be in green cover over winter. The payment for the introductory level is £22 per hectare per annum. The only significant difference for the intermediate level is that the 70% must be 50% green cover and 20% cover crops of at least two species. The payment for this level is £40 per ha, whilst the grassland soils standard payments are £28 and £58 per ha.

The NFU commissioned the Anderson Centre to review the scheme to see if it is financially viable for farmers to participate. It found that the economic returns varied widely depending upon soil type, farm size and system. Andersons have a number of model farms for this work and found that large scale arable farms gained the most, particularly if the requirements were being met already. Those farms that had to change their cropping or husbandry systems would find the costs were likely to exceed the payments.

This is very early days yet, the scheme has only just been launched so it remains to be seen whether farmers think it sufficiently attractive to sign up. Next year it is expected that the advanced tier will be added to the existing standards with new ones on hedgerows, integrated pest management and nutrition management. At that point we should have a much clearer picture of the scheme as a whole.
Whilst ELMS is being introduced, the Basic Payment is being phased out. This year there is a reduction of 25% on sums of £30,000 to £50,000 on top of the 10% cut last year. For sums between £50,000 and £150,000, the reduction is 35% on top of the 20% last year and for sums over that the figures are 40% and 25%. For many farmers, the Basic Payment represented any profit they might have made from their farming activities leaving them reliant on diversification and other income.

Indeed, the criticism from farmers is that many will struggle to stay afloat as the subsidy is phased out and that ELMS is of little help. However, it is clear that productivity gains in recent years have been poor and that improvement in this context is critical. By concentrating the early standards of the Sustainable Farming Incentive on soils, particularly the organic matter content, soil structure and fertility should be enhanced and productivity improved, thus enabling farmers to benefit from higher returns. It makes absolute sense to replace direct subsidies with grants to improve productivity and it would be good to see payments for increasing pulses and legumes in the rotation in the advanced tier. But it takes years, probably a minimum of five, before such gains can be achieved so the question is how many farmers can stay in business long enough to benefit.

The other two elements of ELMS are Local Nature Recovery and Landscape Recovery. Trials continue and it is assumed that the former will be a more or less direct replacement for the current Countryside Stewardship Scheme with an emphasis on collaboration or farmer clusters. Few details of either scheme have been announced yet but there has been outcry at the funding for Landscape Recovery. In January Defra announced that the three elements of ELMS would get equal shares of the available funding, around £2.5 billion a year once the Basic Payment has gone, but later allocated only £50 million for Landscape Recovery for the next three years to cover large scale projects such as forest establishment and the restoration of wetlands. Conservation groups were outraged by this apparent change of commitment but Defra points out that Landscape Recovery is only in the pilot stage and that the funding allocation will be different once the entire ELMS is fully operational by 2028.

With the three essential priorities for farming and countryside policy of food production, wildlife recovery and countering climate change, grant schemes need to achieve the right balance. Defra has held numerous trials and consultations over years in the development of its schemes, time will tell if the lessons have been learnt.