Ben Sharples, Partner in the Agricultural team at UK law firm Michelmores examines the impact of BNG agreements and ELMS on landowners.

The Basic Payment Scheme, currently one of the largest grants in the farming industry, will be phased out by 2028 and a new approach will be introduced. The new Environmental Land Management (ELM) scheme, set under the Agriculture Act 2020, will reward farmers and land managers for producing public goods. The closing of existing agri-environment schemes marks a significant change in farming regulation and enforcement and presents range of opportunities for landowners.

The Environmental Land Management scheme

The majority of land used for farming and agriculture is on privately managed land. This means that the government and conservation organisations will not be able to achieve the environmental objectives for biodiversity set out in the government’s environmental plan without the buy-in of farmers and landowners. They will need to work closely with land managers to meet the UK’s ambitious environmental targets, such as all of England’s soil being managed sustainably by 2030.

The ELM scheme will be integral to achieving this and will allow farmers and other land managers to enter into agreements to be paid for delivering public goods, such as clean and plentiful water, thriving plants and wildlife, and beauty, heritage and engagement with the environment.

Biodiversity Net Gain and private sector contracts

Under the Environment Act 2021, Biodiversity Net Gain (BNG) requires that all development schemes in England deliver a mandatory minimum 10% BNG, which must be maintained for at least a 30-year period.

The ELM scheme, BNG and private off-set schemes will need to be able to operate in combination with each other. This could allow land managers to stack environmental benefits and, for example, gain government funding for the public goods delivered on their land through ELM and also supplement this with private investment for outcomes such as carbon sequestration on the same land.

It is unclear how private sector contracts between developers and landowners will sit within the ELM

Scheme, and landowners will want to know that they will be able to benefit from both. This could see some landowners receiving a higher income from BNG agreements than from traditional farming if they take advantage of developers looking to offset their BNG requirements and develop this new revenue stream

It’s unclear what the effect will be on capital value due to land needing to be set aside for BNG for a minimum of 30 years. Any negative effects will need to be compensated by the offset contracts between landowners and developers. It will also be important that there’s equivalent tax relief for land used for conservation and environmental purposes and landowners should consider how this will impact their tax planning for future generations.  

For the ELM scheme to be successful in helping to achieve the UK’s biodiversity objectives, it will require high uptake from land managers. This can only be accomplished if it’s made clear how farmers and landowners can benefit from private off-set schemes and land managers are paid sufficiently to incentivise the necessary land management.