Daily Junction.mobi portalNews · June 12, 2024 · Daily Junction Editorial Team · 12 min
The UK's transition from EU Common Agricultural Policy payments to the Environmental Land Management Scheme represents the biggest change to farm subsidies in 50 years. As direct payments phase out by 2027, farmers face uncertainty, financial pressure, and a fundamental shift toward rewarding environmental outcomes over food production.
British farming is in the midst of its most profound transformation in half a century. The UK's departure from the European Union's Common Agricultural Policy (CAP) and the shift to a new subsidy system based on environmental outcomes rather than land ownership represents a radical experiment in agricultural policy. For some, it is an opportunity to rewild the countryside, tackle climate change, and create a more sustainable food system. For others, it is an existential threat to family farms, food security, and rural communities.
The stakes are enormous. UK farmers received £3.5 billion per year in CAP direct payments, money that kept many farms afloat and underpinned the rural economy. Those payments are being phased out entirely by 2027, replaced by Environmental Land Management Schemes (ELMS) that pay farmers for planting hedgerows, restoring peatlands, reducing carbon emissions, and creating habitats for wildlife—not for producing food.
The transition is messy, underfunded, and deeply uncertain. Many farmers cannot yet access the new schemes. Others find the payments insufficient to replace lost CAP income. The result is a wave of farm exits, declining food production, and a growing debate about whether the UK is abandoning its farmers in pursuit of environmental goals that may be unrealistic or unaffordable.
The Common Agricultural Policy (CAP) was the EU's farm subsidy system, established in 1962 to ensure food security after the devastation of World War II. It paid farmers based on the amount of land they owned or farmed, regardless of what they produced, how efficiently they farmed, or whether they protected the environment.
By the 2010s, CAP consumed €55 billion per year, nearly 40% of the entire EU budget. The UK received approximately £3.5 billion annually, distributed as direct payments to around 87,000 farm holdings. The average payment was £24,000 per farm, though the distribution was highly unequal: the largest 10% of recipients received 50% of the money, with some estates and agribusinesses collecting millions.
CAP was widely criticized as inefficient and regressive. It rewarded landowners for owning land, not for producing food or managing the countryside well. Environmental groups argued it incentivized intensive farming that damaged biodiversity, polluted waterways, and contributed to climate change. Economists pointed out that it inflated land prices, making it harder for new farmers to enter the industry, and that it distorted markets by subsidizing overproduction.
Brexit gave the UK the opportunity—and the obligation—to design a new system.
The UK government's replacement for CAP is Environmental Land Management Schemes (ELMS), a suite of programs that pay farmers for delivering environmental benefits rather than simply owning land. ELMS has three tiers:
1. Sustainable Farming Incentive (SFI) — pays farmers for basic environmental actions like improving soil health, managing hedgerows, and reducing pesticide use. Payments range from £22 to £640 per hectare depending on the action. SFI is designed to be accessible to most farmers and compatible with food production.
2. Countryside Stewardship (CS) — pays for more ambitious environmental work, such as creating wildlife habitats, restoring wetlands, and planting trees. Payments are higher but require multi-year agreements and more complex management.
3. Landscape Recovery (LR) — funds large-scale, long-term projects (20+ years) to restore entire landscapes, such as rewilding estates, peatland restoration, or river catchment management. This is aimed at major landowners and environmental organizations, not typical working farms.
The government has pledged to maintain the £2.4 billion annual agriculture budget (reduced from £3.5 billion under CAP due to the removal of the largest landowner payments). However, the money is being redirected: direct payments based on land area are being cut by 50% by 2024 and eliminated entirely by 2027, with the savings used to fund ELMS and other programs like grants for farm productivity and innovation.
The theory is elegant: instead of paying farmers to own land, pay them to deliver public goods—clean water, carbon storage, biodiversity, flood prevention—that the market does not reward but society values. Farmers who embrace environmental land management can earn as much or more than under CAP. Those who focus solely on food production will need to become more efficient and competitive without subsidies.
The reality is far messier.
The transition from CAP to ELMS is happening too fast for many farmers. CAP payments are being cut rapidly, but ELMS schemes are not yet fully operational, are difficult to access, or do not provide enough income to replace lost subsidies.
The numbers are stark:
The reasons for low ELMS uptake are multiple:
Complexity. ELMS applications require detailed land management plans, environmental assessments, and multi-year commitments. Many farmers, especially older or part-time farmers, find the process overwhelming and the guidance unclear.
Ineligibility. Some farmers do not have land suitable for ELMS. Intensive arable farms, for example, may have few hedgerows, wetlands, or habitats to restore. Tenant farmers (who farm 30% of UK agricultural land) often cannot make long-term commitments required by ELMS because they do not own the land and their tenancies may be insecure.
Insufficient payments. ELMS payments are often lower than the CAP income they replace, especially for productive farmland. A farmer who received £30,000 in CAP payments may only be able to access £18,000 in SFI payments, forcing them to cut costs, reduce production, or find alternative income.
Delayed rollout. Many ELMS options were not available until 2023 or 2024, leaving farmers in limbo. Landscape Recovery, the highest-paying tier, is still in pilot phase and available to only a handful of projects.
The result is a cash flow crisis for many farms. Farmers are cutting investment, reducing livestock numbers, and deferring maintenance. Some are selling land or exiting the industry entirely. The Tenant Farmers Association reports that 15% of tenant farmers are considering leaving farming in the next five years, the highest rate in decades.
The shift from subsidizing food production to subsidizing environmental outcomes is having a measurable impact on UK agriculture. Food production has declined 6% since 2020, according to DEFRA data published in January 2024. Key trends include:
The government argues this is not a crisis but a necessary adjustment. UK agriculture is relatively inefficient by global standards, and the country imports 48% of its food (by value). The strategy is to focus domestic production on high-value products (e.g., organic, grass-fed, specialty crops) and environmental services, while importing commodities like wheat, soy, and fruit more cheaply from abroad.
However, the Ukraine war and global supply chain disruptions have exposed the risks of this approach. Wheat prices spiked 50% in 2022 when Russian and Ukrainian exports were disrupted. Fertilizer and energy costs soared. The UK's dependence on food imports made it vulnerable to global shocks in a way that countries with stronger domestic production (e.g., France, Poland) were not.
Food security advocates warn that reducing UK food production in an unstable world is reckless. The National Food Strategy, commissioned by the government and published in 2021, recommended that the UK maintain at least 60% food self-sufficiency and increase production of fruits, vegetables, and sustainable protein. Current policy is moving in the opposite direction.
The shift to ELMS creates clear winners and losers.
Winners:
Losers:
The Tenant Farmers Association has been particularly vocal, arguing that ELMS is designed for landowners, not working farmers. Tenant farmers often cannot commit to long-term environmental schemes because their tenancies are short or insecure, and landlords may prefer to take land back for rewilding or carbon projects that generate income without the hassle of tenants.
The shift to ELMS is not just about agriculture; it is part of a broader political and economic project.
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