It was a pleasure to speak again at the conference. We were unable to avoid it this year.
Today, I would like to provide some additional information about our future agricultural policy. First, it is important to mention that EU area payments, which have been a part of our lives for the past 15 years or so are a relatively recent concept. They were created by the 2003 CAP reform and, in some ways, they are a result of an economist’s obsession with so-called decoupling. What has become clearer in recent years is the fact that a subsidy for land ownership or tenure can be just as distorting and costly as a traditional production subsidy.
It has led to an increase in land rents and caused people to hold onto land to collect the payment, when they could rent it out. I now realize that the creation of subsidies based on area was probably a mistake.
An alternative approach would have been to add environmental conditionality to the existing support system. Secondly, to reduce gradually the size of these subsidies while simultaneously increasing the payment rates for agri-environment schemes under the old pillar two.
The approach we are using to shape our future policy is fundamentally different from that of the EU. The EU system was a single subsidy, based on land ownership and tenure, followed by a complex set if rules that everyone had to follow. This new approach will gradually eliminate subsidies for land ownership, and tenure. They will no longer be following the rigid, top-down rulebook of the old EU system and will instead replace them with new payments that encourage sustainable farming.
These new payments won’t begrudge farmers a margin to do the right thing for the planet. In that sense, they will be a departure form the income foregone principle used by the European Union. Instead, rates will only be set at the level necessary to encourage uptake of the scale needed to achieve our environmental objectives.
I am aware that farmers sometimes approach the issue of reforming agriculture policy with the question: How do I recoup the money from BPS? For Government, the question is slightly more complicated. We now have legally binding environmental targets, including one to reverse the decline and destruction of nature by 2030. We as Governments have a responsibility to ensure that our payment rates are attractive enough to encourage the uptake of our schemes at the scale required to reach the targets we have set and which we are legally bound.
Our future schemes will be different in that we are looking for willing participants who are attracted by the scheme’s payment rates. Modularity will be a key feature of the new schemes. Some businesses may embrace the new scheme at all levels and embrace it with high ambition. For others, it may only be a small part of their overall business plan. The most important thing is that they have the option to choose.
Already elements of our future policy are being developed, and the shape is already beginning to emerge. Our new Animal Health and Welfare Pathway has already been launched. Any livestock farmer who is a BPS claimant will now be eligible to receive a funded visit from the vet once a calendar year to implement an animal health strategy. We know that vet visits are expensive and often reserved for critical situations.
We also know that livestock enterprises with the best financial performance often suffer from poor profitability. If we can reduce mortality, improve conditions in the cattle and sheep sectors, this can all have a direct effect on a farm’s profitability. A vet who is more strategic about how to improve animal health on a particular holding could make a big difference.
Some farmers told me that they already do this. In which case they will receive a check for what they already do. I hope that those who aren’t already doing this will accept the payment. It is not going to cost them anything. We will be adding more components to improve animal health and welfare in future.
We also have plans for the Sustainable Farming Incentive. This incentive is designed to encourage sustainable farming across the farm land. Initial modules were focused on soil health. Future modules will include integrated pest management and sensitive hedgerow management.
I am aware that some green NGOs were critical about the Sustainable Farming Incentive’s launch late last year. But I reject that criticism. If we don’t see changes in the farm landscape, we won’t be able to achieve our environment targets. The quality of waterways has a direct effect on many of the protected sites.
We know that hedgerows are the most important ecological building block in the farm landscape. How we manage them is crucial. We know that integrated pest management can be encouraged and a reduction in pesticide usage will have a positive impact on pollinators and invertebrates. It will be an integral part of our approach to achieving the environmental targets we have set.
Today, I’d like to talk a little more about the two other components of our future agricultural policy. This is Local Nature Recovery and Landscape Recovery. Local Nature Recovery will replace Countryside Stewardship. Many farms have a portion of their farm that is not suitable for crop production or less productive or difficult to work.
It is possible to make these parts of the holding special for nature. It could be part of the field, or an area in the valley that is particularly suitable for this. There are also water features and potential ponds. To establish woodland creation within the farm holding. To establish species-rich grassland and to reproduce some of the conditions of traditional meadows that have been lost.
We have learned from pilots that there is also a lot of interest and enthusiasm in partnership working. This is why we are seeing a lot of enthusiasm for groups of farmers from a particular geographic area coming together to work on projects together. Facilitation funding has been made available to support this type of partnership work, which has been so popular. This will also be a feature in the new Local Nature Recovery scheme.
Countryside Stewardship is still available. Today, I would like to remind farmers that the Countryside Stewardship program is a bridge to Local Nature Recovery. Last year, we saw a 40% rise in Countryside Stewardship requests and demand. There are now over 40,000 farmers participating in Countryside Stewardship and legacy Higher Level Stewardship schemes (HLS). We also know that increasing the number of participants in the scheme will increase the number of those who are ready for the new Local Nature Recovery program.
Today, I can also confirm that we will be increasing the Countryside Stewardship payment rates. We will increase Countryside Stewardship rates by about 30% on average. This sends a strong message to farmers about our desire to encourage them to become involved in Countryside Stewardship. For those who have been involved in Countryside Stewardship from the beginning, they will see an increase in the amount of the payments they receive for the work they do. For those who have not yet enrolled in Countryside Stewardship, the approximately 40,000 who have not so far, I urge them to reconsider Countryside Stewardship. It’s much easier now. We have reduced some of the bureaucracy that was so oppressive during the EU era and are increasing the payment rates.
Landscape Recovery is the final component of our future strategy. This will involve much more fundamental land-use reform. To start, we are seeking 15 projects with sizes ranging from 500 hectares to over 5,000. This could be one landowner or a group of landowners joining together.
We have learned a lot from projects like Knepp. This is a very radical rewilding project. Nature can re-establish itself, and you can see significant changes in a short time. Landscape Recovery scheme will focus on two things: first, recovering endangered species in England, and then, supporting that objective, delivering recovery of priority habitats.
Landscape Recovery will not be right for every farm, or every farm holding. While they may not be right for most farm business, they will be right if there are some. It will also allow us to support some landowners’ choices. These schemes won’t be required for everyone. We will provide the right incentives and the right payment rates to help those who wish to participate in these schemes.
It is crucial that we recognize the truth surrounding land use. If we are going to meet our targets for woodland creation in England, which is around 10,000 hectares, and if we want to achieve our goal to restore 300,000 acres of habitat, there will undoubtedly be some land use changes. It is understandable that this causes concern for some people. But you need to see the whole context of the numbers. We have 9.3 million hectares worth of farmland in England. Therefore, we only see change happening on a very small amount of that land.
Food security must be monitored closely. The government is legally obligated to review our food security at least once every three years. The first report from the Food Security review was published just before Christmas. It shows that many sectors are self-sufficient at the moment. We also know there isn’t a direct correlation in the amount of land we have for farming and our agricultural output.
Many of the gains in agricultural output have been due to sectors like poultry and horticulture, which require very little land. In fact, around 60% of our agricultural output is derived from 30% of the land. It is possible to sustain our food production and even increase it. However, we also know that some areas can be more sustainable than others.
It is important to keep an eye on farm profitability. Farm incomes have generally increased since the 2016 referendum result. The exchange rates and the oil price are both closely tied to farm incomes. As the world population grows, so does the demand for certain proteins.
We’ve seen the prices of beef and sheep rise very strongly as a result. Some sectors of the cereal industry have seen their gross margins increase by 30%. It’s difficult to tell at this stage if the farm-gate price changes are structural or temporary. Exchange rates will change at some point in the future. However, it is possible for farm-gate prices to undergo structural changes. That is critical to ensure we have profitable food production in the country.
I have always believed that this should be an evolutionary process, not a revolution. We therefore set aside a seven-year transition time. I am confident that I have been able today to show farmers the path we have taken to get there.
We are not limited to the farmers of today when we design our future agricultural policy. It is important to think about the farmers of the future, even though this is very important. We don’t know many farmers, but we do know some who have always wanted to be farmers, but couldn’t get land. Today’s students are likely to be more environmentally conscious than their predecessors. They value different things in their career choices. They want to make a real difference by delivering tangible and tangible results that matter.
I believe there’s a bright future in the vision we have about agriculture and sustainable agriculture. The delivery of nature and the environment can also be attractive to a new generation.