Natural England

DEFRA Review of agri-environment schemes (AP02/14)

FOR DECISION

Background

1. When the England Rural Development Plan (ERDP) was drawn up in 1999, the two major agri-environment schemes - Environmentally Sensitive Areas (ESAs) and the Countryside Stewardship Scheme (CSS) - were incorporated largely unchanged. The expectation was that the schemes would be reviewed during the period of the plan. 

2. Since that time the policy environment has altered significantly. For example, there has been:

• a Ministerial commitment to reshape and simplify the schemes;
• the report of the Hills Farm Task Force which recommended the introduction of a Hills Environmental Land Management Scheme (HELMS); and
• the report of the Policy Commission on the Future of Farming and Food which recommended that the existing agri-environment schemes should be streamlined and simplified and complemented by a new "broad and shallow" scheme with less demanding prescriptions which would be aimed at all land managers.  

3. DEFRA has now begun the process of carrying out a wide ranging review of agri-environment schemes. The intention is that the results will feed into the mid term evaluation of the ERDP which is due to take place in 2003.

4. The review will include an assessment of the existing schemes - ESA and CSS; the objectives that agri-environment schemes should be seeking to deliver; their relationship with other incentive schemes and with other policy mechanisms; the need for a "broad and shallow" scheme; and the design, structure and operation of any future scheme. 

5. It will not address the Policy Commission's recommendation that the rate of modulation should be increased to finance an expansion of resources for agri-environment schemes, nor their more general recommendation for a progressive transfer of resources within the Common Agricultural Policy from production support towards wider social and environmental objectives. These issues will be taken forward by DEFRA through the exercise to develop a Strategy for Sustainable Food and Farming (see Board Paper AP02/13).

6. The review has begun with a public consultation seeking views at a strategic level. This exercise will be followed by a further series of consultations on specific proposals for introducing new or amended agri-environment schemes and on the role of access in agri-environment schemes. 

Purpose of this paper

7. This paper:

• seeks Board approval for our position on the issues on which DEFRA is seeking a view. The detailed response and subsequent consultations will be dealt with at officer level, following discussion with the lead board members for ELMT and Countryside Capital, and with the Chairman, as necessary.  

Broad issues on which the Government is seeking a view 

8. The broad areas that will be covered by the review, and on which DEFRA is seeking a view are:

• objectives for agri-environment schemes - what should they be seeking to achieve?
• what should the relationship be between agri-environment schemes and other mechanisms (such as regulation, assurance schemes etc)?
• what should the relationship be with other incentive schemes (Farm Woodland Premium Scheme, Organic Farming Scheme, Hill Farm Allowance Scheme, etc.)?
• is there a need for a "broad and shallow" scheme and how should such a scheme be designed and structured?
• how should agri-environment scheme(s) operate in the future, including what should be the basis for payments and how should participants be supported?  

Recommendations

9. Our recommendations under each of these headings are as follows:

What should be the objectives of agri-environment schemes?

• The England agri-environment programme should continue to address biodiversity, landscape, the historic environment, access and amenity  

• Access and amenity must remain as components of any future scheme. The principle that the public should have physical access to the benefits purchased under the schemes is important and there should be greater weight given to this issue in the scoring of applications. This is because the public value that accrues from those sites which are fully accessible will be greater than those which are inaccessible. Such an approach will also offer an opportunity to increase public knowledge about the schemes and about the way farming is supported. The development of local rights of way improvement plans will also provide an opportunity to ensure that any new and enhanced access delivered under the scheme meets local needs, and relates effectively to other forms of access (e.g. CROW access land). 
• There should be scope for addressing other aspects of sustainable land management through the schemes, including soil erosion, diffuse pollution and flooding, but only where specific positive action is required. However, this must not reduce the ability of the schemes to deliver against the existing objectives.  

What should the relationship be between agri-environment schemes and other mechanisms?

• The definition of Good Farming Practice included within the ERDP currently represents the baseline of environmental standards above which payments can be made. It defines what farmers are expected to deliver, across the whole farm, without agri-environment payments. It includes compliance with existing environmental legislation, a number of verifiable standards (relating to issues such as overgrazing and hedgerow management) and possession of and a recommendation to follow the Codes of Good Agricultural Practice on Water, Soil, Pesticides and Air. However, it represents a very narrow definition of Good Farming Practice. Its contents were driven by the requirement that all components had to meet EU standards for verification and that it had to be agreed quickly to meet the tight timetable for drawing up the ERDP.
• Since this definition was agreed, there has been work to develop verifiable baseline standards, driven by the desire to use assurance schemes to reassure the public about basic standards of environmental care (as well as to meet their primary aim of ensuring the safety and traceability of food). These baseline standards are still under development but have their origins in the Codes of Good Agricultural Practice or are practices that represent no/very low cost to farmers.
• Agri-environment schemes should not pay for practices that represent legislative requirements, have their origins in the Codes of Good Agricultural Practice or that would involve no or very low cost to farmers. The existing ERDP definition of Good Agricultural Practice should be revised and enhanced to ensure that agri-environment scheme payments are only being offered in response to actions that the farmer could not reasonably be expected to deliver without further payment. This principle is important for both "broad and shallow" and "narrow and deep" agri-environment schemes.  

What should the relationship be with other incentive schemes?

• The first priority is to ensure that the different incentive schemes complement each other.  

• There is a much wider issue of the lack of integration between the different RDR measures and consequently between the different measures within the ERDP. However, given that a single integrated and flexible system is not possible in the short term, we see a need for :  

• i. more action to co-ordinate and streamline the administration of all ERDP measures across regions (e.g. by investigating the development of a single application form); and  

ii. consideration to be given to enabling organisations other than DEFRA (such as National Park Authorities) to deliver the different schemes within a specific area. 

Is there a need for a "broad and shallow" scheme?

• The principle that as many farmers as possible should be encouraged to deliver specific public benefits in addition to food and fibre is important. Given the likely limits on budgets in the short term, a "broad and shallow" scheme available throughout England is a sensible approach. However, funding for existing schemes must be protected, and new resources should not be spread too thinly;  

• If such a broad scheme is not to be criticised as simply offering production subsidies by another name, the specific public benefits must result from practices that go beyond what farmers can be reasonably expected to undertake without further payment. In other words the benefits must be in addition to those achieved through the revised and enhanced Good Farming Practice (GFP) proposed above, rather than a mechanism for ensuring all farmers deliver GFP. This latter function is best achieved through assurance schemes and/or by expanding the specific environmental conditions imposed on direct payments, commonly known as "cross compliance."  

• A broad and shallow scheme should aim to ensure that a large proportion of farmers manage a set area of their farm and a set length of linear features for wildlife, historic or landscape interest, and that they provide a set level of access. A simple whole farm environmental audit and plan should be produced and the scheme should aim to encourage more farmers to enter into the narrow and deep scheme(s) and therefore undertake more ambitious environmental management in the future.  

How should any scheme(s) operate in the future?

• The principle of 'income forgone' in the EU regulations is not helpful, particularly because it implies that the farmer is being compensated for a loss rather than paid for a product or service that is valued in its own right. However, alternative options, such as Contingent Valuation techniques, are likely to be equally contentious and more complex to administer. In addition, there have been very few cases where it has been the cause of real problems. Therefore the income forgone approach should remain for the moment but further work should be carried out into alternatives. These should be discussed with the European Commission with the aim of seeking change in the next round of CAP reform.  

• More pressing is the introduction of a degree of regional variation in payment rates. While there would be administrative costs attached to this, it is necessary in order to ensure delivery of the desired public goods and services in the right place and not simply where the "price is right."  

• The role of RDS project staff, DEFRA administrative staff and partner organisations must be clarified. In the event that applicants and partner organisations are to be expected to have a greater role in developing higher quality applications there will be a need for much more detailed guidance on targeting, the development of a clear quality threshold, and a more transparent system for scoring applications. Consideration should also be given to introducing a waiting list as a means of preventing wasted resources associated with consecutive applications.  

Annex 1

Glossary of Terms

"Broad and Shallow" Agri-Environment Scheme - a scheme which is designed to be available to a large proportion (possibly even the majority) of land managers. As the share of the budget available for each participant in the scheme is low, the conditions attached to the payments are relatively limited. Consequently the benefits delivered will also be limited but they will be delivered over a wide area of land. Such schemes have been quite commonly used elsewhere in Europe.

"Narrow and Deep" Agri-Environment Scheme - a scheme which concentrates resources on a much smaller area but aims to secure a much greater degree of environmental benefit from each participant. Payments will be higher, scheme requirements much more onerous and only a minority of land managers will be able to take part. The Countryside Stewardship scheme is a current example. 

Income Forgone - a major component of the calculations currently used to determine the payment that farmers will receive in return for agreeing to carry out a specific management activity or to abide by specific rules. The use of this approach is required by the Rural Development Regulation. The other components of the calculations are the actual costs incurred and an incentive element that must not exceed 20%.