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Farm support payments should be refocused so smaller producers can turn a profit while enhancing the environment, says a think tank. The Green Alliance... ‘Reform ELMs so small farms make a profit’

Farm support payments should be refocused so smaller producers can turn a profit while enhancing the environment, says a think tank.

The Green Alliance argues that the current structure of the government’s Environmental Land Management scheme (ELMs) is unfair and inefficient because it rewards large arable farms that are already profitable without payments.

Meanwhile, comparatively unprofitable family farms – especially in the uplands – are  struggling to benefit, says the think tank. This means bigger arable holdings find it easier to thrive while loss-making livestock farms are in jeopardy.

The alliance wants the government to enhance support for smaller grass-based family farms by increasing the amounts paid for planting trees and restoring peatland. It says this would ensure the scheme delivering its environmental aims.

Increasing payments for carbon sequestration from £17-24 to £75 per tonne of CO2 would help upland farms restore their incomes to 2019 levels by planting native, biodiverse woodland on half of their land, says the alliance.

‘Little benefit’

Green Alliance senior policy analyst Lydia Collas says: “After quite a bit of progress since 2016, we could now be left with a scheme that neither restores nature nor supports family farms.

“We need to act to avoid a system which ends up directing most of the money to the wealthiest farms – the reason ministers have criticised the old EU scheme. We could move to a greener system while helping hard-working upland farmers stay afloat.

“If the government targeted public money towards nature restoration on smaller farms on more marginal land, tackling climate change and restoring nature would cost the taxpayer less and have a lower impact on producing food.”

Following its Agriculture Act in 2020, the Westminster government decided to phase out EU-style Basic Payments in England by 2027 and move towards a system based on restoring nature and other public goods.

Payment rates

The Green Alliance says all types of farms could become economically viable through a mix of agricultural income and nature-based payments – if the payments matched the value attached to climate change mitigation elsewhere in the economy.

There is growing fear that farmers are shying away from the new ELMs scheme because payments are too low for environmental work – with some producers calling for a switch back to the old EU-style system.

Under the old scheme, arable farms making £100,000 from food production also received around £115,000 of subsidy simply for having land. But the bottom 20% of farms received just 2% of the total payment pot.

Even with basic payments and unpaid labour, upland grazing farms earned an average of just £12,700 in 2019. This research shows that rewarding these farmers properly for public goods could see their income rise to £34,525.

Ideas and advice pave way for diversification

Diversification was a hot topic at last month’s Farm Business Innovation event – offering lots of new ideas and support for farmers and landowners.

Held at the Birmingham NEC on 15-16 November, the two day show included a broad array of speakers and seminar sessions alongside a range of exhibition stands to help increase non-farm revenue.

Louise Newton, of rural consultants Bidwells told listeners: “With the loss of the Basic Payment Scheme, there is a need to create alternative sources of income on farm while spreading risk by not relying on primary agricultural production.”

Changes to government support, geopolitical uncertainty, high input costs and volatile commodity markets mean diversification is an increasingly important source of income for many farm businesses.

Maintain income

With only about half of a farm’s basic payment recoverable through environmental schemes, more farmers will have to diversify if they are to maintain their income, said Country Land and Business Association policy adviser Avril Roberts.

Fraser Rutherford, head of marketing at Environment Bank, said: There is a real level of interest in diversification, with farmers much more open now to ideas due to changes in the industry.”

Leicestershire milk producer James Mann, who runs a vending enterprise, said: “We have vending machines at home and have been looking for further inspiration here and have picked up some suppliers. It has been really worthwhile.”