Editor’s View: Why we should have seen the SFI collapse coming
© Adobe Stock Well, Defra’s SFI closure bombshell this week means it turns out it was an unsustainable farming incentive after all.
Like hapless Looney Tunes villain Wile E Coyote briefly sprinting in mid-air after running off a cliff, Defra’s heroic attempts to reconcile an uncapped cost with a finite budget have come crashing down.
Officials and ministers have been locked in discussions for months as £10m-£20m a week of new SFI contracts flowed out the door and the £1.8bn Environmental Land Management budget spend ticked remorselessly towards 100%.
See also: ‘Cruellest betrayal’ as Defra halts new SFI applications
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As I understand it, had legacy Basic Payment Scheme (BPS) funding not been cut at a faster-than-expected rate last year to free up more budget, then applications could have been shut as early as last October.
It’s lucky that stressed officials have access to a government-funded mindfulness, meditation and sleep app (at a cost to the taxpayer of £162,000). I bet it’s red hot this week.
The regrettable lack of notice given to farmers was apparently to prevent a last-minute stampede from applicants – unsustainable for Defra’s budgets and its creaking IT system.
Perhaps if it hasn’t got any money left for paying for environmental goods and services, the Rural Payments Agency can give angry farmers the meditation app login details to help them destress.
If we are honest, though, this has been a plausible scenario ever since farming and environmental campaigners failed to persuade Labour to commit to a bigger farm budget at the last election.
And it is fair to congratulate all those who did manage to move in time, as well as to commiserate with those who did not. The impact for some of the latter will undoubtedly be serious.
Consider an arable farming business eligible for £30,000 in BPS payments in 2020. In 2024, it was paid £15,000, and this year it will get precisely £7,200.
Cashflow would have been tight as a result of that and its farming income being shot to pieces by the weather last year. Now, a hoped-for SFI income of perhaps £122/ha has vanished.
If it has a business as well-run as the Andersons Loam Farm model, that will leave them with a business surplus of some £74/ha instead of the £196/ha forecast for 2025, a 62% decrease.
Another significant blow at a time when farmer confidence is already at rock bottom – borne out by February’s new tractor sale numbers hitting a 26-year low even before this news broke.
Could this scenario have been avoided? The inquest has already begun.
Outgoing Oxford Farming Conference director Geoff Sansome says this might have been avoided if politicians at the top of Defra had paid more heed to their own internal advisers than NFU lobbyists.
He claims warnings about the removal of caps on capital expenditure, a lack of an underlying finance model and pressure to make the SFI as akin to BPS as possible were ignored.
That may well be part of the issue, but the economic backdrop should not be discounted either – I would say Defra officials are much more worried about the outcome of the upcoming spending review than they were six months ago.
Predicting the size and ambition of any future environmental scheme now feels like a fool’s game.