Change is coming. We don’t know the rules of the game yet, and we can’t be sure who the winners and losers will be. But the one thing we know for certain is that natural capital is going to be the currency in this new world.
As climate change has moved towards the top of the government’s priority pile, attention has inevitably turned to those managing our countryside and what they should be doing to help the UK achieve its net zero aims.
At its most basic level, natural capital refers to those naturally occurring assets that provide a benefit for the environment, the population or the economy. So, for the environment this covers clean air and water, soil quality, trees, flood prevention, and much more. And for the public, providing footpaths and providing access to parkland are just two examples.
Most of these things inevitably involve farmers and landowners, who will need to be incentivised to shift their focus away from food production and towards environmentally friendly or publicly beneficial activities.
But although we know change is on the horizon, and a big one at that, we’re yet to learn the details.
“Last year the government published its consultation into ELMS and an Agricultural Transition document,” said Mark Russell, Partner and Natural Capital lead at Carter Jonas. “If you read both together, you get the sense that politicians want a wholesale change of mentality. They’re trying to push a cohort of farmers out the door so they can bring in a new generation of land managers who buy into an approach to the land that is not about commodities. The big problem with this is that policy makers will need to throw an awful lot of money at it in order to change it from one thing
to another.”
Is there anything farmers should be thinking about to ready themselves for change?
Love thy neighbour
“Start with thinking about why you're doing what you’re doing, and what you want to be doing in five years’ time,” Mark said.
“If the answer is ‘farming’ then you may not need to do anything other than prepare yourself for a change and make sure you’re talking to your neighbours.”
Mark believes those set to benefit the most from the ELMS scheme will be those who work together with their neighbours and undertake a scheme on a landscape-scale.
“If I had a 400-acre farm on grade 2 land in Cambridgeshire I don't think I would be going into a new environmental scheme right now because I'm not sure the money in it is enough,” Mark explained. “But I would be forming a farming cluster with the six farms around me because it’s that partnership that will be attractive to the top tier of ELMS when it materialises.
“I might even be trying to talk to my local wildlife trust because they will be the ones who will really have access to money, either through grant schemes or private capital.”
Farmers and land managers should also take the time to think about what they hope to achieve when change does come, because the different potential approaches will not always complement each other.
“If you wrap public access into it, that works against biodiversity - they’re almost
exact opposites.
“The way that environmental services are being portrayed at the moment is very black and white, but taking a hectare of land and making it as biodiverse as possible is very different to taking the same hectare and trying to create as much carbon capture as possible,” Mark said.
“Then you get all these overlapping policy-based requirements because different organisations will pay you for different things – the water authorities might pay you for doing one thing, whereas Defra would pay you for doing something else, or you might be able to sell environmental services to a company like Microsoft who would want you to do something different again.”
Putting food on plates
But what about those who just want to focus on food production?
“We’re not saying ‘you shouldn't bother about food’ but that side of things is going to be more driven by what consumers demand from their supermarket-labelled food,” Mark said.
“At the Aldi end of the spectrum, there is still a market for the cheapest chicken on the shelf. But, if a consumer wants to know about the provenance of the wheat that produced their bread, they will also want to know a positive story about the way that farm is interacting with the environment.
“There will come a point when Bernard Matthews says all its chickens have to come with green credentials. And that will either be when the government tells him he has to be carbon neutral, or when Waitrose and Tesco tell him his chickens have to be carbon neutral.”
Mark believes that making a profit from food production is only going to get
more difficult.
“I can only see the costs of production going up,” he added. “Creating more healthy soils, producing food more extensively, offsetting carbon – all those things will incrementally chop away at your bottom line. Unless there is an increase in food prices, the profitability is going to erode, so the only way businesses will be able to generate a profit from food production is by getting bigger.”
“If the government wants farmers to move from farming to environmental land management, they will have to match the tax incentives,” Mark said.
Owners, and their daughters and sons, who are considering moving away from food production also need to consider the tax implications. Stopping active farming will mean that land is no longer eligible for agricultural property relief for inheritance tax.
With so many unanswered questions, what should your next steps be, if anything?
First steps
“If there is a private deal to be done on your farm’s marginal spaces, I would do that now,” Mark said, but build in flexibility to the deal you agree.
“Any wholesale changes to the entire farm business I would do later after taking outside advice from an adviser such as Carter Jonas.
“Our job is to understand all the interactions and pressures between all the relevant organisations involved, from charities to local authorities, allowing you to focus on your particular enterprise.
“It doesn’t hurt to start those conversations now. It’s a journey, not a quick decision.”
Turning a problem into an opportunity
Public access has always been a thorny issue with some landowners who, while welcoming people to the countryside, are often the ones left counting the cost of littering, livestock worrying, gates left open and walkers straying from paths.
With the pandemic increasing the number of people flooding to fields and footpaths, the issue of crop destruction caused by not sticking to rights of way was emphasised during the wet winter weather and now the dry spring.
Images on social media highlighted some of the worst-hit fields in which visitors avoiding muddy footpaths had trampled crops up to 12 metres into the field. The costs of such damage – according to illustrative analysis carried out by Carter Jonas – suggests it would cost a farm business over £1,100 in seeds, fertilisers, sprays and operational costs. Assuming the damaged crop is feed grade wheat or barley, the expected gross margin lost is around £3,174 – higher for milling and malting quality.
The problem, along with the new natural capital agenda, is leading some landowners to develop ventures involving the public paying to access private areas of farms and estates.
Dog walking fields – such as the one pictured her above at the Bragborough Hall Estate in Northamptonshire – offer secure, fenced access for paying members of the public during daylight hours. Other landowners have put in place 5km circuits which are available via club membership, or created bike loops around the edge of a farm.
Mark added: “For those who own land close to conurbations, there will be opportunities to grant access to land in a controlled manner that adds an income stream to the business. That could make use of land which doesn’t generate huge returns currently but appeals to the public who want to walk, picnic, cycle or simply enjoy the surroundings."
Turning to trees
A number of opportunities for landowners looking to plant trees for either private carbon sequestration agreements or to create forests look to be growing too.
Marc Liebrecht, Associate Partner at Carter Jonas, said recent changes to the registration process for the Woodland Carbon Code should be noted – all projects after 30 June 2021 need to be registered prior to any planting commencing.
He added that the Code was likely to be a key component in woodland planting schemes due to be announced in the near future.
“It is likely that the grants for woodland and forestry creation will have the Woodland Carbon Code embedded in them, which should streamline processes and add critical mass to these schemes,” Marc said.
Also of note to those considering tree planting is a new woodland creation scheme from Forestry England which offers rent to landowners – including public bodies, environmental NGOs and farmers – in return for a leases of between 60 and 120 years.
Applications are being sought from a wide range of landowners able to offer a minimum of 50 hectares – although the first expressions of interest are sought by 1 June, so time is tight. Any existing planting scheme can be registered before that date.
Once a lease partnership is agreed, Forestry England will design, plant and manage every site as part of the nation’s forests including any local consultations or engagement.
Marc said: “For the risk adverse this could be a good option – you effectively let your land and, at the end of the lease, are handed back a forest.
“This is not a new concept as landowners have been offered much longer leases in the past, but for those considering planting trees it would be worth looking at, with advice from an expert.”
Read our recent Rural View article on opportunities in forestry
Flood prevention is perceived as a significant public good by the Government and could allow farms and estates near villages and towns to tap into funding to help protect homes and businesses by holding water upstream.
Opportunities flowing from water
Another natural resource that needs protecting and enhancing is water, and opportunities for landowners are taking shape.
Separately, water quality - encompassing the well-reported issues with the presence of nitrates and phosphates from agriculture and wastewater treatment in our river ecosystems – is being tackled by groups.
Efforts are currently very region-specific – for example work is being done to protect the Solent and the Stour Catchment in Kent – but similar schemes will be drawn up across the UK.
Looking closely at the need to ensure ‘nitrate neutrality’ in the developments across the Solent region, the latest figures suggest that as many as 10,000 residential units are unable to come forward.
A ‘phosphates calculator’ has also been introduced in Somerset, which identifies the compensatory measures required to achieve neutrality.
In some instances, third party land has been acquired by local planning authorities and ‘banked’ as a nutrient sink, to which developers can make a contribution.
how far have we come, and where are we going?
Natural capital
“Farmers and land managers should take the time to think about what they hope to achieve when change does come.”
“There will come a point when Bernard Matthews Says all its chickens have to come with green credentials”
“Dog walking fields are just one such example –
but a good one, due to their
low capital investment and running costs.”
“You effectively let your land and, at the end of the lease, are handed back a forest.”
What opportunities already exist?
The first of three new schemes (alongside the Local Nature Recovery and Landscape Recovery schemes), this incentive will pay farmers for the actions they take to manage their land in an environmentally sustainable way. Initially only open to farmers who receive payments under the BPS, it is currently being piloted by several hundred farmers before being rolled out more extensively next year.
Sustainable Farming Incentive
Almost 3,000 farmers and land managers have been taking part in trials of the new Environmental Land Management scheme since 2018.
ELMS trials
An approach which aims to leave the natural environment in a measurably better state than beforehand. The government announced in 2019 that any new developments in England would be required to demonstrate a 10% increase in biodiversity on or near development sites.
Biodiversity Net Gain
Pays for actions that support local nature recovery and deliver local environmental priorities. It will encourage collaboration between farmers, helping them work together to improve their local environment.
What’s to come?
Local Nature Recovery
Will support the delivery of landscape and ecosystem recovery through long-term, land use change projects. This includes projects to restore wilder landscapes in places where that is appropriate, large-scale tree planting, peatland and salt marsh restoration projects.
Landscape Recovery schemes
Read our Rural View article on building biodiversity
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