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NAO: Defra’s short-term planning raises eco and monetary risks

Author: ICAEW Insights

Published: 15 Sep 2021

An NAO report has found the Department for Environment, Food & Rural Affairs’ plan for sustainable agriculture reforms lacks in-depth, long-term planning which could cost them value for money.

Defra’s Future Farming and Countryside Programme is a crucial part of the department’s plans to achieve the wider environmental objectives of the government’s 25-year environment plan and to meet the government's net zero targets by 2050.

The programme is billed as a “once-in-a-generation opportunity to reform agriculture”, and will consist of schemes targeted at enhancing the environment, protecting the countryside, improving the productivity of the farming sector and improving animal health and welfare.

Central to Defra’s proposals is the Environmental Land Management scheme (ELM), the primary mechanism for distributing the funding previously paid under the EU’s Common Agricultural Policy (CAP). Instead of CAP direct payments, ELM will pay farmers for undertaking actions to improve the environment. It has three components, each of which will be launched in full in 2024:

The Sustainable Farming Incentive (SFI) will be open to all farmers and will pay them for actions to manage their land in an environmentally sustainable way.
Local Nature Recovery will pay for more complex actions that deliver benefits at a local level and aims to encourage collaboration between farmers.
Landscape Recovery will support large-scale projects to deliver landscape and ecosystem recovery through long-term land-use change projects such as large-scale tree planting and peatland restoration.

NAO’s key findings

In a value for money report, the NAO assessed The Environmental Land Management (ELM) scheme headed by Defra and laid out the following key findings:

Defra has yet to develop detailed delivery plans beyond March 2022.

The need for improvement in Defra’s forward planning has been a recurrent issue, highlighted in the NAO’s previous report and by the Infrastructure and Projects Authority (IPA) in reviews undertaken in August 2020 and March 2021. The NAO stated that Defra’s current high-level plan for ELM beyond March 2022 is incomplete, with particular gaps in the analysis of the dependencies between different workstreams.

Ensuring cost-effective delivery

Defra has set a target to reduce administrative costs compared with existing agri-environment schemes but according to the NAO has not yet developed its approach to achieving these. Defra has set a cap for administrative costs at 10% of scheme payments, compared with up to 18% under current agri-environment schemes. The NAO stated that Defra has based this target on a desired level of savings on current scheme costs, rather than a detailed understanding of the cost drivers in existing and future schemes.

Communicating digitally with stakeholders

The department adapted its engagement plans to respond to the disruption caused by the pandemic. Because of COVID-19 restrictions, Defra put many of its engagement plans on hold, including raising awareness through events such as farmers’ markets and a national roadshow. It has instead explored other ways to engage with farmers, including webinars, online forums and launching a ’Future Farming’ blog and podcast, which share Defra’s current thinking and updates on policy progress.

Conclusions on value for money

The NAO’s report highlights the fact that Defra and its delivery partners have worked hard in challenging circumstances to design ELM within the planned timescales. However, important elements are not yet in place, creating risks to environmental outcomes and value for money.

The report finds that the ELM is not yet underpinned by a strong set of objectives and Defra’s planning is too short-term in its focus. Defra also has considerable work to do to ensure ELM is delivered in a cost-effective way including developing its approach to controlling fraud and error and to delivering cost savings.

Before launching ELM in full, Defra is piloting its three components, starting with an initial cohort of around 1,000 farmers from October 2021 - initially, the pilot will be limited to SFI. The department plans to add further participants over time to reach 3,500 and is looking to launch some core elements of SFI at scale in mid-2022. This will allow farmers to start earning income for providing environmental benefits as direct payments start to be phased out.

For the full NAO report click here.

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