After the Chancellor announced a radical change to APR and IHT in October, we should probably have braced for further unexpected policy switches. Nonetheless the overnight closure of the Sustainable Farming Incentive (SFI24) scheme on 11 March, without the promised six weeks’ notice, was a major shock. Reaching the budget cap was the given reason but the sudden axing of the scheme has left many farming businesses’ budgeting in serious disarray.
The government responded to criticism by announcing that a new budget and reformed scheme would be announced in the summer Spending Review, but it will not open until 2026. The CLA estimates that fewer than half of eligible farms are in the SFI scheme, well short of the 70%+ that Defra had originally envisaged would take advantage by 2027, the end of the transition period.
Existing agreements will be honoured
In the meantime, what we do know is that the 37,000 SFI agreements already in place will continue to receive payments under the terms of their three (or more limited five-year) agreement. Agreements should also have been offered to those who had already applied before the 11 March cut-off, providing their application was eligible, and to anyone who had been prevented from submitting their application due to an IT problem, or were still waiting for their requested ‘assisted digital’ support from the RPA.
In a new development (12 May), following the threat of litigation over the lack of notice, Defra has reopened the scheme to those people who had started the application process after 12 January but had not completed it before 11 March. The RPA will contact eligible applicants (believed to be around 3000 people) to submit their applications within six weeks (although certain restrictions will apply).
Revised SFI offer aimed at least profitable farms
The general view is that the revised offer (SFI25) will offer fewer actions and will be aimed at those farms that find it harder to turn a profit and can deliver more environmental benefits. The implication is that any universality suggested by the breadth of the actions on offer under SFI24 is unlikely to continue so more productive / profitable farms will have to rethink their long-term business plans. Given the inflationary pressures on farm budgets, we’re already seeing farmers abandoning plans to implement environmentally friendly practices in favour of intensifying production.
Criticism deflected
At Westminster, MPs’ impassioned pleas to reconsider were deflected. Criticism poured in from all corners of the industry. Simon Britton, Head of agri-consultancy at Knight Frank spoke for many when he commented, “A scheme intended to provide stability during the transition has instead created further uncertainty, raising serious concerns about the government’s approach to agricultural policy.” The government seems to have forgotten that farming operates on a long planning cycle and this decision is not helped by the fact that delinked BPS payments are also being reduced this year by 76% for those receiving less than £30k, and by 100% for amounts about £30,000.
Please get in touch if you have any questions about restructuring the business to meet these new challenges. We are always happy to work with other professional advisers to arrive at the right solution for individual farming operations.
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