H&H Land & Estates Head of Conservation & Environment, David Morley, unpicks the impact on farmers in the latest Government spending review.

In the Government spending review announced a week ago, DEFRA secured an annual budget of £2.7 billion for the next three years. Of this, £2.3 billion will be spent on payments to farmers, which includes environmental land management schemes, schemes to support innovation and enhance productivity and the remainder of de-linked Basic Payments.

In comparison with the average spend over the past three years, this represents a reduction of about £200 million per annum. This is a smaller cut than had been anticipated by many commentators, but it's still a significant downturn in farming support. In a world of ever-increasing global uncertainty, it is concerning that food security appears to be so low on the list of Government priorities.

Environmental Land Management Schemes

Around £2 billion a year has been allocated to land management schemes, including Sustainable Farming Incentive (SFI), Countryside Stewardship (CS), Landscape Recovery (LR), legacy Higher Level Stewardship agreements (HLS) and Capital Grants. Commitments to existing agreements are likely to take up around 40% of the funding. No breakdown has been given as to how the remainder of the pot may be divided between new SFI, CS, LR and Capital Grants agreements.

At present, SFI, CS and Capital Grants are all closed to new applicants. Higher Tier CS is expected to re-open later this year after a two-year hiatus but will be 'invitation only' and so available to very few farmers. An announcement about the future of SFI is expected in 'the summer'. A re-launch of the Capital Grant Scheme is also anticipated in this unspecified summer period, although the grants that can be applied for will be capped, as per DEFRA's previous announcement.  Landscape Recovery Schemes take up to two years to finalise, which means that little of that funding will find its way to farmers in the near future.

Innovation & Productivity

An average of £300 million a year has been allocated to schemes to encourage innovation and enhance productivity. It seems likely that the majority of this money will support the industrial end of the farming spectrum, with little to benefit smaller family farms.

De-linked Payments

De-linked payments for 2026 and 2027 will be limited to 2% of the first £30k of a Basic Payment Scheme claimant's reference amount. That means a maximum payment of just £600 a year, down from £7,200 in 2025. To all intents and purposes, that effectively ends de-linked payments two years earlier than had been planned under the previous Government. For many farmers, especially those in older land management schemes, there have been limited opportunities to make up for this shortfall in income.

Other Nature Schemes

The other £450 million per year in the funding commitment will be spent on 'nature schemes', comprising the Nature for Climate Fund and Biodiversity Targets Programme. This will provide further funding for tree planting and peatland restoration outside the environmental land management schemes, but it is not yet clear how this will be targeted or who will be eligible to apply.

Overall, the DEFRA budget has not been cut by as much as was feared, but the reduction is even more substantial in real terms when inflation is taken into account. It is hard to assess what the impact of this cut will be. As ever with DEFRA announcements, the devil will be in the detail, of which there is very little at this stage. In the meantime, the ongoing uncertainty continues for farmers with virtually no schemes currently open, making it very challenging to decide how best to take their businesses forward.