Environmental Land Management Schemes: where are we now?

The Agriculture Act in 2020 confirmed that Environmental Land Management schemes (ELMs) were to be put in place across the United Kingdom, replacing the EU Common Agricultural Policy (CAP) in the wake of the UK’s exit from the European Union. This was welcomed at the time by many in the farming community. The EUP CAP Basic Payment Scheme (BPS) paid farmers based on how much land they owned, and so was criticised for typically benefitting wealthier farmers and not taking into account good land management practices. 

The schemes collectively pay farmers and land managers to deliver, alongside food production, significant and important outcomes for the climate and environment. These include:

• creating and restoring a broad range of wildlife-rich habitat, as well as continuing to protect habitat already managed under our existing agri-environment schemes
• improving water quality, by reducing nitrogen, phosphorus and sediment pollution from agricultural activities, building on the existing Catchment Sensitive Farming approach
• increasing resilience to flooding and drought through nature-based solutions such as natural flood management
• creating more new woodlands and treescapes to increase tree and woodland cover, and encouraging management of existing woodlands, including to increase their resilience to pests and diseases
• reducing carbon emissions, storing carbon and increasing resilience to climate change, for example through management of soils, water, peatland and trees

There are three funding types:

Agricultural Property Relief 

In the Conservative Government’s last budget in March 2024, prior to the general election in July 2024, it was confirmed that Inheritance Tax Act 1984 will be amended so that the environmental value of land managed under an environmental land management agreement will be eligible. This would mean that Agricultural Property Relief (APR) would be applicable to ELMs from April 2025, removing the tax barrier.

Note: APR is a type of inheritance tax relief that reduces the amount of tax that farmers and landowners pay when passing farmland to the next generation. APR can help keep farms in the family, which allows them to continue to produce food and care for the countryside.

Labour Government Autumn Budget 2024

In Labour Government’s 2024 autumn budget, it was confirmed that the budget for farming in 2024/2025 was £2.4 billion, with £1.8 billion of that budget earmarked for ELMs. It was also announced that the APR change would be applicable from April 2026, instead of April 2025, delaying the relief by a year. This has raised concerns as it is forecasted that this will reduce land value and may force farmers to sell land to pay for inheritance tax until the change comes into force.

Overall, ELMs have been welcomed as they provide funding based on impact-based environmental actions, rather than land size. Further tools and actions have been provided to support the roll-out of ELMs, and environmental experts have requested that targets for nature recovery, carbon sequestration, and natural flood management be put in place prior to agreements being commenced, without delaying ELMs any further. 

It has been confirmed that the Office for Environmental Protection will be the watchdog for the monitoring of outcomes of ELMs. The Department for Environment, Food, and Rural Affairs have confirmed that, to date, there are over 34,900 CS agreements, 13,900 SFI 2023 agreements, and over 20,000 applications to the SFI have been received. 

However, it has been noted that certain challenges have raised some doubt in meeting the environmental outcomes in practice. These challenges include demographic change, soil erosion, loss of labour, biodiversity loss and climate change.

Bibliography

1. ELM scheme is our moonshot at nature recovery | CIWEM
2. Government review of ELMS farming subsidies stokes anger | BBC News
3. Environmental Land Management (ELM) update | GOV.UK
4. What does the government's farming budget mean for Environmental Land Management? | Sustain
5. Part 1: What will the Environmental Land Management Schemes pay for? | British Ecological Society
6. Part 2: Will ELMS achieve their environmental objectives? | British Ecological Society
7. Tax barrier to farmers engaging in ELMS removed in Spring Budget | FarmingUK
8. Environmental land management | House of Lords Library
9. Environmental land management schemes | DEFRA Farming Blog
10. A guide to Environmental Land Management Schemes: A new form of funding for farmers | Foot Anstey
11. Budget 2024: maintaining momentum | DEFRA Farming Blog
12. Summary of reforms to agricultural property relief and business property relief | GOV.UK
13. Balancing UK agricultural production and environmental objectives | POST
14. NFU responds to Defra 'underspend' on agriculture budget | NFUonline
15. Environmental Land Management: Policy Discussion Document | DEFRA
16. Farm funding: Implementing new approaches | House of Commons Library
17. The Sustainable Farming Incentive: stats to know | DEFRA Farming Blog

Image credit: © Kirill Gorlov | Adobe Stock