SUBSIDIES AFTER CAP

This briefing note summarises ELMs in England and SFS in Wales, focusing on how they may apply to rewilding activities. See the Rewilding in England & Wales: Subsidies under CAP briefing note for information on rewilding and the subsidies under the Common Agricultural Policy (“CAP”) framework, which remains relevant despite Brexit.

2.1 The UK Government’s 25 Year Environment Plan

On 11 January 2018, the government published a policy document entitled ‘A Green Future: Our 25 year plan to improve the natural environment’.¹ Its application is primarily limited to England, except where the UK Government is responsible for policies that affect sectors across the UK and internationally (e.g. climate change). The plan sets out to achieve, amongst other things, a growing and resilient network of land, water and sea that is richer in plants and wildlife. On land and in freshwaters it aims to do this by:

• restoring 75% of the one million hectares of terrestrial and freshwater protected sites to favourable condition;
• creating or restoring 500,000 hectares of wildlife-rich habitat outside the protected site network, focusing on priority habitats;
• taking action to recover threatened, iconic or economically important species of animals, plants and fungi, and where possible to prevent human induced extinction or loss of known threatened species; and
• increasing woodland in England in line with an aspiration of 12% cover by 2060: this would involve planting 180,000 hectares by the end of 2042.

The first review of the 25-year plan was published in January 2023.² The review assessed progress made in relation to each of the 10 goals set out in the original plan and made further commitments toward reaching the government’s environmental targets.

2.2 Agriculture Act 2020

In England, the Agriculture Act 2020 (the “AA 2020”) replaces the CAP and establishes a legal framework for a new agricultural system following the UK’s exit from the EU (as above, note that some elements of the CAP currently remain in place).³ Broadly speaking, the AA 2020 allows the Secretary of State to establish a new agricultural system based upon the principle of “public money for public goods”, such as improvements to the environment.⁴

The AA 2020 primarily applies to England and provides for the current system of Direct Payments to be phased out. Section 1 AA 2020 states that the Secretary of State may give financial assistance for, or in connection with, a number of purposes including: managing land or water in a way that protects or improves the environment; managing land, water or livestock in a way that mitigates or adapts to climate change; conserving native livestock, native equines or genetic resources relating to any such animal; and protecting or improving the health of plants. The new financial assistance schemes made under these provisions are the ELMs. There are also powers for the Secretary of State to modify and extend other existing EU support schemes, such as Rural Development Programmes.

2.3 Environment Act 2021

The Environment Act 2021 (the “EA 2021”) sets out a framework for legally binding targets to deliver environmental improvements, primarily in England.⁵ Part 6 of the EA 2021 makes provision, among other things, for:

• biodiversity net gain to be a condition of planning permission in England;

• a general duty on public authorities to have regard to conserving and enhancing biodiversity;
• there to be local nature recovery strategies for areas in England; and
• species conservation strategies and protected sites strategies.

The EA 2021 requires the Secretary of State to set at least one long-term target in each of the following areas: air quality; water; biodiversity; and resource efficiency and waste reduction. It also requires targets to be set for fine particulate matter and species abundance.

In December 2022, Defra published the following targets:⁶

• halt the decline in species populations by 2030, and then increase populations by at least 10% to exceed current levels by 2042;
• restore precious water bodies to their natural state by cracking down on harmful pollution from sewers and abandoned mines and improving water usage in households;
• deliver the government’s net zero ambitions and boost nature recovery by increasing tree and woodland cover to 16.5% of total land area in England by 2050;
• halve the waste per person that is sent to residual treatment by 2042;
• cut exposure to the most harmful air pollutant to human health – PM2.5; and
• restore 70% of designated features in the UK’s Marine Protected Areas to a favourable condition by 2042, with the rest in a recovering condition.

Separately, in March 2022, Defra published a Nature Recovery Green Paper on protected sites and species in England.⁷ This proposed significant reforms to the implementation of wildlife site designations, habitats regulations and species protection but has not, to date, been implemented.

The EA 2021 requires the Secretary of State to prepare an Environmental Improvement Plan (EIP) to significantly improve the natural environment in England. The government’s 25-year plan to improve the environment was treated as the first EIP, and a subsequent EIP 2023 has been published.⁸

The EA 2021 also required the Secretary of State to publish a policy statement on environmental principles, which explains how the environmental principles should be interpreted and applied by government when making policy.⁹ In addition, the EA 2021 established a new independent environmental body, the Office for Environmental Protection, to hold public authorities to account and to provide government with advice on environmental law.

In June 2023, Defra published a policy paper setting out the key aims of ELMs, including paying farms to improve the environment and animal health and welfare, and reduce carbon emissions.¹⁰ Within this, “farmers” includes farmers, tenants, landowners, land managers, growers and foresters.

The paper also included updates on the Landscape Recovery, Countryside Stewardship and the Sustainable Farming Incentive Schemes.

3.1 The Landscape Recovery Scheme

The Landscape Recovery Scheme (“LRS”) is particularly relevant for rewilders and focuses on “radical and largescale” approaches to creating environmental change over the next 20 years. It’s open to all private landowners/ managers or groups, and public bodies but only in collaboration with private land managers.

Applications for the first round of pilot projects launched in February 2022 and closed in May 2022, and applications for the second round launched on 18 May 2023 and closed in September 2023. The government is committed to launching a further round in 2024 and expects to continue to launch at least annual rounds in future years as the scheme is scaled up.

There LRS has four main distinguishing features:

• large-scale projects: the scheme is designed to deliver outcomes that require collaborative action across a big area, such as restoring ecological or hydrological function across a landscape;
• long-term public funding (e.g., for 20 years or longer): the scheme will support outcomes that take a long time to deliver, such as peatland restoration, woodland management, or habitat restoration;
• bespoke agreements: the scheme can fund activities that contribute to priority outcomes but are specific to the locality and thus difficult to facilitate through other schemes; and
• blended funding: the above features and the provision of development funding should enable projects to attract private investment.

Projects will be able to blend the public money on offer with payments from private investors. Initially projects will be awarded “development” funding from the government to support detailed planning of the project over a roughly two-year period. The intention is that successful projects will, at the end of this period, proceed to implementation with agreed government funding supplemented by private sector financing.

The first application round

In the first-round funding was awarded to 22 pilot projects, the majority of which involved groups of farmers and land managers working together. The application process focused on two themes: (i) recovering and restoring threatened native species (birds and insects); and (ii) restoring streams and rivers.

The chosen projects aim to collectively restore over 400 miles of river and protect/provide habitats for at least 263 species.¹¹

The criteria for the selected 2022 projects focused on feasibility, costs and potential impact, including environmental benefits, carbon and climate resilience, and social impact. Applicants were required to evidence management control of the land, or consent from those with management control, and had to show that any tenants in the project area had been engaged and were supportive.

The second application round

For the second round in 2023, the government improved the process based on its evaluation of the first round, including simplifying the guidance, running a simple competition for all projects, consolidating the criteria, removing the upper size limit on the scale of projects which can apply, and introducing a cap on the project development grants.¹²

This second round focused on funding projects that: (i) contribute to net zero, such as peatland, woodland and carbon sequestering practices; (ii) support protected sites, such as sites of special scientific interest, special area of conservation, and Ramsar wetlands; and (iii) support wildlife-rich habitats, such as acid or calcareous grassland, and coastal saltmarsh or sand dunes. All projects were also required to provide extra benefits, such as: (i) improved water quality; (ii) helping threatened species to recover; (iii) improved soil health; (iv) increasing resilience to natural hazards, for example, flooding, drought, erosion, fire; or (v) social benefits, such as physical access, participation and engagement with nature.¹³

There was no specific list of activities that qualify for the LRS, as each project would comprise a bespoke agreement negotiated for the specific project. Eligible land was widely defined, only requiring that the project be:¹⁴

• on land in England; and
• a broadly connected area of at least 500 hectares.

The projects could:

• involve whole holdings or parts of them;
• extend across national borders as long as there are at least 500 hectares in England, although only the land in England will be eligible for funding; and
• include land that is in other government schemes.

In this second round, funding was awarded to 34 projects – 12 more than the previous round. The chosen projects aim to restore over 35,000 hectares of peatland, create over 7,000 hectares of woodland (including temperate rainforest), and benefit over 160 protected sites (including Sites of Special Scientific Interest).¹⁵

The third application round

At the time of writing, applications for the 2024 series have yet to open.

3.2 Enhanced Countryside Stewardship (CS)

Whilst the government initially planned to create a new Local Nature Recovery scheme, it has instead decided to further develop the existing Countryside Stewardship (“CS”) framework, with the latest guidance issued in January 2024.¹⁶

CS provides financial incentives for farmers, foresters and land managers to look after and improve the environment by: increasing biodiversity; improving habitat; expanding woodland areas; improving water quality, air quality and natural flood management. CS is made up of eight grants (when they are all open).

Overview

Applicants should generally have management control of the land for the duration of the agreement to be eligible; where they do not, applications will require the written agreement of all parties with management control. Applicants do not need to qualify as “farmers”, as they do for BPS payments (see the Rewilding in England & Wales: Subsidies under CAP briefing note), but the eligibility requirements for CS agreements vary by agreement and some do require the land, for example, to be arable.

Agreements usually involve receipt of an annual grant so long as the terms and/or conditions of the agreement, the scheme and the relevant CS manual are complied with.

The key elements of the CS framework are:

• Woodland-related grants: these include (i) Protection and Infrastructure grants¹⁷ to support woodland and beaver management; (ii) Woodland Management Plan (WMP) grants¹⁸ to create a UK Forestry Standard compliant 10-year woodland management plan; and (iii) Woodland Tree Health (WTH) grants¹⁹ to help restock or improve woodland after tree health problems.
• Higher Tier grants²⁰: these are area-specific and are only available for the most environmentally important sites, commons and woodlands requiring complex management (such as the creation of habitats and habitat restoration). Applicants are generally able to claim against the full national list of management options and agreements can be longer than five years in term, with up to 10 or 20 year agreements available in some cases. Grants in respect of common land or shared grazing can only be made for 10 years
• Mid Tier grants and Wildlife Offers21: these grants are available as either five-year agreements or for specific, one-off capital works. Mid Tier supports a wide range of management options, whereas Wildlife Offers focus on providing habitats for farm wildlife and is noncompetitive.
• Standalone Capital Grants²² and Higher Tier Capital Grants²³: these are standalone capital grants which provide 3-year agreements to achieve specific environmental benefits and can also be used to support and complement the other funding offers. The Higher Tier Capital Grants provide additional environmental benefits without the need for a Higher Tier grant.
• Implementation Plan (PA1) and Feasibility Study (PA2) grants²⁴: these provide funding for more complex agreements and projects, and applicants must first discuss with Natural England before applying.

Updates under ELMs

Initial improvements were announced by the Rural Payments Agency in January 2023.²⁵ These included:

• increasing the duration of agreements that started on or after 5 January 2023, so that agreement holders will have three years to complete the capital works in their agreement;
• moving some Higher Tier items into Mid Tier to promote wider engagement with biodiversity friendly options; and
• increasing the maximum amount allowable for a single application by £20,000 (to £80,000), with a limit of £20,000 for certain groups such as boundaries, trees and orchards and water quality.

In their latest Agricultural Transition Plan update,²⁶ Defra announced further changes, including:

• increasing payment rates by 10% on average (compared to 2023);
• offering premium payment rates for 21 high priority actions, such as raising water levels in peat soils, creating nesting plots for lapwing, and connecting river and floodplain habitats;
• adding 50 new actions to ELMs;
• offering a streamlined, single application process for both CS Mid Tier and the Sustainable Farming Incentive Scheme (see section 3.3), whereby farmers can select a combination of actions from both schemes that work for them; and
• aiming to take forward twice the number of CS Higher Tier agreements by the end of 2025 to 2026.

Implications for rewilding

Rewilders may also be interested to note that CS also provides Higher Tier and Mid Tier grants that support applicants in converting their farm or land to organic status and maintaining it as such.

There is also a Facilitation Fund²⁷ which supports individuals who act as facilitators to bring together groups of applicants across multiple land holdings, in order to aid them in delivering CS priorities on a larger landscape scale (at least 500 hectares of land is required in usual circumstances) with an agreement lasting for three years. Facilitation funding is available, for example, to farmers, foresters and land managers working together across multiple holdings (requiring at least four entirely or mostly adjoining holdings managed by different people) to improve the natural environment

Additionally, Wildlife Offers may be particularly relevant to those wishing to improve wildlife on a farm (e.g., providing winter food for seed-eating birds or providing sources of nectar and pollen for insect pollinators). Each option has its own payment rate and different options are on offer depending on whether the applicant’s land is arable, lowland grazing, upland or mixed farming land. Agreements are for fixed terms of five years.

3.3 The Sustainable Farming Incentive Scheme (SFI)

The aim of the SFI scheme is to assist farmers in managing their land in a way which improves food production, and which is more environmentally sustainable. Applications for the Sustainable Farming Incentive (“SFI”) scheme opened in June 2022 via the online Rural Payments Service.

Applicants for an SFI agreement had to be eligible for the now-closed Basic Payment Scheme (BPS) in 2022 or 2023.²⁸ See the Rewilding in England & Wales: Subsidies under CAP briefing note and government guidance.²⁹

Given the new scope and support available for rewilding in the Landscape Recovery and Countryside Stewardship Schemes discussed above, we do not anticipate that many rewilders will seek subsidy support via the SFI scheme and therefore this note does not address the topic further.

4.1 Legislative background

As agricultural policy is a devolved matter, Part 7 of the AA 2020 provides powers for Welsh ministers to determine agricultural policy for Wales and the majority of the provisions discussed above do not apply to Wales.

The Agriculture (Wales) Act 2023 (the “AWA 2023”) received Royal Assent in August 2023.³⁰ The AWA 2023 establishes the principle of Sustainable Land Management as the new framework for agricultural policy in Wales and sets out four objectives (the “SLM Objectives”).³¹ These objectives are intended to guide future policy making with regards to climate change policy, the Well-being of Future Generations (Wales) Act 2015 and the Environment (Wales) Act 2016.³²

Following the AWA 2023, the Welsh Government has proposed replacing the BPS and Glastir schemes (see Rewilding in England & Wales: Subsidies under CAP briefing note) with a single Sustainable Farming Scheme (“SFS”). Among other things, the SFS aims to support the agricultural industry in Wales and reward farmers for actions that align with the SLM Objectives.

After completing a co-design project and issuing their response in July 2023,³³ the Welsh Government launched a final SFS consultation that closed on 7 March 2024, and the scheme is set to start in 2025.³⁴ The remainder of this briefing note is based on the final consultation document and thus may be subject to change.³⁵

4.2 Proposed scheme structure and implementation timeline (subject to consultation)

The four proposed SLM Objectives, which underpin the SFS, are to:³⁶

• produce food and other goods in a sustainable manner;
• mitigate and adapt to climate change;

• maintain and enhance the resilience of ecosystems and the benefits they provide; and
• conserve and enhance the countryside and cultural resources and promote public access to and engagement with them, and to sustain the Welsh language and promote and facilitate its use.

The consultation proposes that the SFS will sit above existing minimum legal requirements and aim to encourage and support farmers to go further. A three-layer structure is proposed:³⁷

• Universal Actions, which are mandatory for all SFS participants (see section 4.3);
• Optional Actions,³⁸ which offer participants the choice to undertake the actions most important and appropriate to their particular circumstances; and
• Collaborative Actions, which offer participants the chance to work with others and deliver projects on a larger scale.

Each Action will be associated with a payment value and linked to a set of SLM ‘outcomes’, such as reduced greenhouse gas emissions, protected natural landscapes and high animal health and welfare. The Universal Actions will launch in 2025, with the Optional and Collaborative Actions to be introduced in phases between 2025 and 2029 (the “Transition Period”).³⁹

Contracts awarded under the SFS are proposed to last for one calendar year, from 1 January to 31 December.⁴⁰

4.3 Eligibility, scheme rules, and Universal Actions

Eligibility

The following eligibility criteria have been proposed for the Universal and Optional Layers. Applicants:⁴¹

• must be a farmer undertaking agricultural or ancillary activities on agricultural land situated in Wales;

• must have at least three hectares of eligible agricultural land in Wales or be able to demonstrate more than 550 standard labour hours; and
• must have exclusive occupation and management control of the land for at least 10 months of the calendar year.

“Agricultural or ancillary activities” are as defined in the AWA 2023, and broadly cover the production, rearing, or growing of agricultural products, including harvesting, milking, breeding animals and keeping animals for farming purposes, as well as taking action on agricultural land to create and manage habitats, nature conservation, mitigate climate change or maintain and enhance the resilience of ecosystems.⁴²

“Management control” would cover Owner Occupiers, tenants with a Farm Business Tenancy, a full Agricultural Holdings Act 1986 tenancy, or an unwritten tenancy with the same level of control. Where there are multiple farmers with a share farming agreement, only one farmer can claim SFS.⁴³

Scheme rules

Applicants must also comply with a set of scheme rules, and failure to do so may affect all or part of their SFS payments. The proposed rules include to:⁴⁴

• ensure that the Universal Actions applicable to the farm are maintained for the full calendar year;
• have a minimum of 10% tree cover by the end of 2029;
• manage a minimum of 10% of the farm as habitat for the benefit of biodiversity alongside food production; and
• adhere to the Universal Code for Habitats to prevent further loss or damage to semi-natural habitats.

These requirements will be enforced by a Level 1 Habitat Baseline Review upon the farm’s entry to the SFS, as well as ongoing on-the-spot-checks via physical inspection and remote observation. A more in-depth Level 2 review will also support the Optional Layer.⁴⁵

Universal Actions and Baseline Payment

A set of 17 Universal Actions has been proposed,⁴⁶ some of which may support rewilding activities. For example:

• maintaining all existing semi-natural habitats (e.g. enclosed wetland, enclosed semi-natural dry grassland, dense bracken etc);
• creating temporary habitats on improved land (e.g. fallow crop margins, wildlife cover crops) in order to meet the 10% habitat scheme rule requirement (see above); and
• creating new woodland and agroforestry.

Farmers which carry out the Universal Actions relevant to their farms will receive a Universal Baseline Payment, calculated based on the area of the farm. Certain Universal Actions (i.e. woodland maintenance, woodland creation, and habitat maintenance) are proposed to have a different payment rate per hectare than the other Universal Actions.⁴⁷

4.4 Transitional arrangements

It is proposed that during the Transition Period of 2025 to 2029, farmers can choose between the SFS or BPS. However, once they have chosen to participate in the SFS, they will not be able to revert back to the BPS. In addition, BPS payments will be tapered by 20% each year from 2025, eventually reaching 0% in 2029 when the transition to SFS is complete.⁴⁸

During the Transition Period, farmers who received BPS payments in 2024 and decide to join the SFS will receive an additional Stability Payment to cover any shortfall between the Universal Baseline Payment and the ‘notional’ BPS payment they would have received that year.⁴⁹