Rural Hub

Sustainable Farming Incentive scheme – What do we know?

4 mins

Defra is planning to introduce a new temporary scheme to bridge the gap until the new Environmental Land Management (ELM) system is fully working in late 2024.

The Sustainable Farming Incentive (SFI) scheme is being billed as a ‘stepping stone’ to support farm incomes and encourage more farmers to change to soil- and wildlife-friendly practices during the crucial 2021-2024 transition period, when Basic Payments start to fall, but ELM is not yet available.

No details of the new scheme have been published, but it is understood that the SFI could start in in 2022 and would be available to all farmers who currently received BPS payments.

It could be a package of actions Defra wants farmers to take which are over and above the regulatory minimum and as a ‘building block’ to better management.

This would help the government to make progress on its environmental commitments, including the need to move towards net zero greenhouse emissions, ahead of ELM being available to everyone.

The idea of an interim scheme is new, but a Sustainable Farming Incentive was first mentioned by Defra secretary George Eustice in his keynote speech to the NFU Conference in February 2020.

Talking about his vision for ELM, he said he envisaged three tiers, the first being “a sustainable farming incentive which will be open to any farmer and will incentivise participation in farm level measures such as integrated pest management, sensitive hedgerow management and soil health.”

This suggests that the SFI could effectively be making elements of Tier 1 of ELM available earlier than Tiers 2 and 3.

It is believed that the payment rates could be similar to Countryside Stewardship rates and the scheme would be voluntary, not mandatory, simple and short term.

Mr Eustice has promised that a document outlining Defra’s plans, which will describe the transition process in more detail, including what its new productivity grants could look like, will be published in the next month or two.

Defra has previously said the Countryside Stewardship Scheme will be available until 2023, for agreements starting on 1 January 2024, but the SFI may be appealing to farmers who are unwilling to sign up to a full CSS agreement ahead of ELMS being rolled out.

Future farming funding gap explained

However, while the Sustainable Farming Incentive is a welcome stepping stone during the transition period, for individual farmers it is unlikely to fill the financial gap left by the phasing out of Basic Payments.

Strutt & Parker first identified the challenge facing the sector due to the change from the current Common Agricultural Policy-based support system to ELMS in June 2019. We called it the ‘future farming funding gap’.

Farmers are likely to earn significantly lower profits from environmental schemes, which typically generate 10-20% profit, than the current system of Basic Payments, which generates 80-90% profits per pound of subsidy.

Even using optimistic assumptions about farms increasing productivity and receiving higher payment levels under ELMS, our analysis identified the potential for a significant fall in farm profits for average and low performing farms by 2028, which is when Basic Payments are fully phased out and replaced by the ELM system.

The top 25% performing farmers are much less affected, as they are less reliant on Basic Payments and the cut is largely negated by increases in farm productivity and higher agri-environment payments.

This highlights the importance of farms doing everything they can to be as efficient as possible, to get themselves into the top 25% of performers. This will involve taking steps to improve productivity, looking at ways to maximise income sources away from mainstream farming and tapping into payments from agri-environment schemes.

We will need the best farmers in terms of crop and livestock production and also conservation of the environment if the industry is going to become more productive, while also contributing to reversing declines in biodiversity and mitigating against climate change.

Alternatively, some farmers may choose instead to pass the management of their land to others, for example, options like contract farming agreements could become increasingly popular allowing the farmer to stay involved in decision making, while the land is physically farmed by efficient contractors.

Strutt & Parker has produced a calculator to assess the effect of the proposed changes on net profits, allowing for three sets of scenarios. A member of the farming team can run any business through the scenarios, free of charge.

James Farrell
Head of Rural
Send a message to James Farrell
4 mins

Related Articles


BPS calculators to help farmers plan for 2020-2028 subsidy changes

UPDATED TO INCLUDE DEFRA’S AGRICULTURAL TRANSITION PLAN ANNOUNCEMENT ON 30 NOVEMBER 2020 The government has provide more details of Basic Payment Scheme (BPS) direct payments will be phased out in England starting in 2021.  Many farmers wish to assess what effect it will have on their farm business profits. Our Farming Department has produced two […]

The Path to Sustainable Farming: Six things you need to know

DEFRA has published further details of how it plans to implement the Agriculture Act in England from 2021 onwards. The document, The Path to Sustainable Farming: An Agricultural Transition Plan 2021 to 2024, sets out how Basic Payments will be reduced over the next four years and outlines how the new Environmental Land Management (ELM) […]

Agriculture Act 2020 – a new era in farm and rural policy

The passing of the Agriculture Act 2020 on 11 November 2020 was a significant moment, firing the starting gun on the introduction of a whole new agricultural policy regime for farmers and landowners. There will be many people in the sector who are too young to remember life before the EU’s Common Agricultural Policy (CAP) […]

Environment Land Management System (ELMS) – is it on track?

The Environment Land Management System (ELMS) will form the basis of agricultural policy in England, replacing direct payments made through the Basic Payment Scheme (BPS) with an environmental scheme paying public money for public goods. Work on the design of ELMS is well under way, and involves a process of Pioneers, tests and trials and […]

Talk to us

Want to talk to us about our rural specialisms? Send us a message and we will make sure it gets to the right person.

Please write your name
Please write a message

Sign up

Sign up to be notified when we launch new publications so you’re always ahead of the research.

Please write your name
Please write a correct email address
Send me updates about
Please tick a box