Good morning, everyone, and welcome to this meeting of the Environment, Food and Rural Affairs Select Committee. We are a few members light this morning. Helena Dollimore, Jayne Kirkham, Sarah Bool and Andrew Pakes all have duties on Bill Committees elsewhere in the House or else I am sure they would want to be with us. The focus of our discussions this morning is the National Audit Office and their examination of the Department and the farming and countryside programme. Dame Tamara, on which congratulations, we welcome you back to the Select Committee. For the benefit of those who are watching our proceedings, and indeed for the official record, I invite you to introduce yourself and the colleagues you have with you

I am Tamara Finkelstein. I am the Permanent Secretary of the Department for Environment, Food and Rural Affairs.

I am Emily Miles, the Director General for Food, Biosecurity and Trade at DEFRA.

Jonathan Baker, one of the deputy directors in the farming and countryside programme.

Dame Tamara, we will start with a bit of an overview of the NAO’s report. I think we always understood, and it was to the Department’s credit, that when we undertook the big changes that we have been witnessing and that have been rolled out in the last few years, that this was never going to be a big bang. It would always require an iterative approach and that you would learn from experience as you went on. Indeed, that is the way you have developed things. There have been both strengths and weaknesses as a consequence of that. The strength is obviously that if something is not working you change it. A criticism that I think would be levelled at you in this report, and by the sector more generally, is that the consequence of that is that there has been quite a significant degree of uncertainty around the changes and that has hindered the roll-out of some of the changes. Overall, the impression of the report is that everybody is very clear about where they want to get to but there is a bit less clarity around how you are going to achieve these outcomes. I will start by taking you through the impact on food production and food security. You have within the report the tension between productivity gains and increased yields to offset the agri-environment schemes in food production. How is the Department supporting farms to increase productivity?

I will start where you started, with the report. It was a really welcome report and, once again, helped us with our learning, indicated the progress that we have made but, as you say, raised a number of issues, including the one about uncertainty, which perhaps I could address. It is worth saying that we have made quite a lot of progress on some of the areas that the NAO has raised since the report—I suspect we will come to some of those—but we have made quite a lot of progress on developing our approach to outcomes and measuring the success of developing our digital system and so on. I hope that we will also get to talk to that. On the point about uncertainty and with a large programme that is looking to a sector to make a significant transition over a long period, we are seeking to get the balance right between learning as we go and iterating, usually in response to what we are learning from the sector and what we are learning as we roll things out. We made quite significant changes between SFI 2022 and then SFI 2023, and saw a significant take-up of SFI 2023 linked to the changes that we have made, getting the balance with that with giving certainty. We absolutely recognise the need for certainty. One of the important points is the spending review gives us what our settlement is for the following three years. We then have a stretch in which we can give considerably more—

We will come to the spending review later. Of course maybe not the biggest of bangs but a pretty big bang was the decision of the Chancellor in the Budget to accelerate the removal of direct payments. What changes have you had to make to your programme as a consequence of that?

We are moving forward on coming out of the direct and delinked payments.

The acceleration of the ending of direct payments was a very significant move for a lot of farmers. In an approach that you describe yourself as being iterative, how have you been able to cope with that?

That is setting out what our schemes are and encouraging people to come into the schemes. As we have seen that big take-up for SFI 2023 and now the expanded offer for 2024, we expect more people to be looking at the measures that they can take in coming into those schemes as a result, as the transition moves along. On productivity, we also have had capital grants that support the shift into integrated productivity, so there is a range of ways.

Mr Roca has a question for you in a second on productivity. Is it fair to characterise the Department’s view as being one that productivity would improve by virtue of the changes?

There is a range of ways in which we—

The move away from direct payment of itself would be sufficient to improve productivity? I see your colleague to your right nodding.

I will add a couple of things and then maybe bring in Ms Miles. There is a range of ways in which we expect to see improvements in the viability and so on, and productivity. One is people moving into our agri-environment schemes, greater diversification of businesses, reductions in agricultural rents, and so on. There is a whole range of ways but maybe I can bring in Emily.

Behind the concept of removing the basic payment scheme was the expectation that that would encourage productivity improvements, and I think we have seen that already. I believe there has been about a 1% productivity improvement. There have also been some indications of improvement in the first couple of years in increased profits from diversification and capital efficiency. The ratio between capital and income has gone up by over 25%. There are signs. We are in the third year now where we have been looking at, so we just need to review that. Income fell slightly last year, whereas the previous couple of years it was higher for farmers. There are actions within the schemes. Improving soil health, improving animal health through the SFI makes a difference to productivity on farms. Then there are particular grant schemes that are focused on productivity improvements, so the farming equipment and technology fund and the farming investment fund, and last week the Secretary of State announced the adopt fund.

Of course these are competitive schemes and I think they are oversubscribed, aren’t they?

Yes.

Is that necessarily helpful in a place where you are encouraging behavioural change in the whole sector? What happens for those who do not meet the cut, basically?

I think what we are seeing with the adopt concept—and that has been a heavily co-produced scheme with lots of farmers—is that there was an issue around how to get innovative practices understood and adopted elsewhere. If we are funding the people who are cutting edge and then others are coming to the demonstration farms and seeing them, that spreads the understanding and change. Then there is the general incentive through cutting the basic payment scheme, which means others will have to think through how they generate more income.

If I may also comment, I think it is worth reflecting on the decision that Ministers took this year in the context of when the transition started and over what phase we have been talking about reducing delinked payments. It was in perhaps 2017 that the idea of moving away from delinked payments was first introduced. Legislation then came in and was introduced in, I think, 2018, passed in 2020. In the preceding years we have set out a number of ways that we can support farmers through free business advice. It is only recently in particular that we have had to put budget controls around some of our schemes for the preceding few years. They were broadly accessible to anyone who sought to apply, as long as they were delivering value for money. There has been a huge amount of investment over the preceding three years, which has helped support that adoption. Some of the trends that Emily and Tamara referred to are bearing the fruit of the previous initiatives and policies.

I promise we will not tell Treasury what you say about this, but is the acceleration of basic payment ending helpful to you as the iterative approach or not?

Inevitably it has the consequence of focusing on productivity and that was why the Treasury have always thought that the basic payment scheme was not sufficient value for money. We are moving to the sustainable farming incentive and other schemes where we are paying for actions that will improve nature but also hopefully improve productivity on farm. Smaller budgets focused on those productivity farming grants should make a difference.

What are you doing to measure and evaluate that?

We track a number of things. As I think the NAO report said, through the basic payment scheme we had a very specific and granular sense of who was receiving what money and farms and so on. We do a number of other surveys. We look at farm incomes. I am sure my colleagues will have the detail, but we are tracking a number of different things to keep an eye on that, and we report at least every six months in public on those things.

We will come to detail on other issues later on.

Can I follow directly on that question, Chair? Based on your modelling of the productivity improvements needed—and there was a suggestion in the report that one in nine farms would need to make productivity gains of 10%, which is quite significant—how many farms realistically might not be able to make the improvements necessary to stay viable?

What is written in the report is basically our modelling. I think it was saying that something like 92% of farms had an opportunity for productivity improvement. I can look up some more detail and share that in a second, if that is useful. The modelling that is reported in the report is focused only on certain factors. It is not taking into account some of the external factors like climate shocks or commodity prices globally. It is just looking at the opportunity for farms within the context of the things that we know we have control over.

As the Chair has alluded to, there was already uncertainty in the farmer opinion tracker from 2023, I don’t know if there has been a recent one. I would suggest that that acceleration and removal of direct payments might exacerbate uncertainty. How are you monitoring different types of farming and their transition to ELM schemes?

We monitor farm incomes. We have very detailed and granular information on the types of farms that are taking up schemes. I can tell you on week by week how much hectarage is under schemes, what kind of farms they are, whether they are cereals or uplands or livestock and so on. We have all of that information on the actual roll-out of the schemes. On top of that we do a six-monthly survey of farm incomes and a number of other factors where we are trying to assess the productivity. For example, we have information on total factor productivity and the ratio between capital and income, and we are doing a calculation about that sort of thing we are measuring.

On inputs, there is a suggestion that moving to some of these ELM schemes means that there will be less reliance on pesticides and so on, but is the Department considering reduction targets on things like pesticides and fertiliser?

We are, in the main, focused on outcomes and what actions we need to deliver those outcomes. We do have not a direct one about reduction in pesticides. There are other actions that link to us looking to deliver the outcomes that were set out in the annexe to the report. We made a lot of progress on the trajectories of change that we look to see on that. We will be doing a pesticide action plan in February, which will have more information about actions on pesticides.

As we have discussed, all types of farms are seeing falling incomes recently, combined with a quicker than expected reduction in the direct payments. This could pose an opportunity in the farming sector but we need that purposeful action rather than just getting money out the door in the usual way. What is your sense of enthusiasm from farmers about these changes?

Our tracker shows that 60% of farmers think they have the information they need for business planning, some quite positive sense of farmers knowing some of what needs to be done. There are some less positive things about their trust in the Department that we continue to work on. The iterative nature of what we have done has shown the increase in the take-up of SFI 2023. Now the expanded offer shows, just by action, that people are understanding what they need to do, are getting some of the information that they need and are taking part in the schemes. We always want to do more. There clearly is a sense we want more certainty and more information, and we continue to plan for providing more information, but I think it is positive. You might see that the Secretary of State talked about having a farming road map to 2050 and at the Oxford farming conferences we did some workshops with farmers about what they would like to see in that. The take-up of those workshops and the enthusiasm to be part of what does this change look like was interesting. People are accepting that change needs to happen, they want to be part of it and there is quite a lot of enthusiasm to be part of building that road map.

We touched on the 1% productivity improvement and you talked about diversification, capital versus income, then looked at soil health and animal health. If one in nine farms are looking to find more than 10% improvement, and we have been in this process of BPS since Brexit, is that 1% productivity improvement over that length of time—what is the timeframe? Do we already have 1% and where is the 9%? If that is the length of time you have had for the expectation of this is going to happen, where will the other 9% come from in respect of those farms that require that increase?

I think 1% was annual, so it would accumulate. The core thing about the productivity improvement is clearly you have a range of farms at the moment, some of whom are in the upper quartile and some of whom are in the bottom quartile. The one in nine that you were describing will be in the bottom quartile at the moment. We basically need to move those at the bottom up to the middle for productivity to ensure that they have viability. If they are not going to be viable obviously the market will act and do its thing. I do not think we can expect that every single farm will be viable but if we are talking about 92%, 93% having the opportunity of productivity improvement, that is what we are aiming for.

It is probably worth saying that productivity will not be the only element that supports viability. Participation in the schemes is another element of it, what we have seen happening on rents and what we expect to happen on rents and diversification. Those are all elements that support that viability.

To be clear, when you say the market will act, do you mean effectively those farms will no longer be viable and go out of business?

They are businesses and they need to make a profit, but we are also offering lots of assistance and support and opportunities. As Tamara said, there are agri-environment schemes. There were actions taken last week, announcements made last week at the Oxford farming conference to help farms diversify income so that in lean years they have more opportunity from other sources of income. Then we are trying to make sure that the best practice around productivity can be shared and taken up.

At the end of this, if 92% to 98% remain viable, 7% to 8% do not. That is quite a significant chunk of the sector.

That is the indication of the modelling. But again, that is to do with modelling, it is to do with what farmers choose to take up, and we are trying to make opportunities.

Are we not missing one very important piece of policy context here? I do not see how you can possibly know how this will work. I certainly, as a parliamentarian, cannot scrutinise your work in this without the land use framework. When are we going to get that?

We are expecting to quite shortly put something out.

Summer, autumn?

No, sooner.

In the next month.

Yes, in the coming weeks, genuinely very soon. It is out for write-around with colleagues from around government. It is very close. That will enable us to have a consultation on what should be in it and then we will publish it later, but before the summer.

Would it not have made sense to get that first?

First before?

Before you start the—

One of the most important points we will have, as I say, is after the spending review when we have a longer period of certainty on funding and set out what the next few years look like, which is likely to come in the autumn. The land use framework will be an important part of that, which will give us those tools and data. That approach will be important, as will the food strategy. The Secretary of State has announced having a food strategy and the review of the environmental improvement plan, because obviously our outcomes are very much governed by that. We need to take a very interactive systems approach. I think the land use framework is important and it will come shortly.

We shall look forward to that. Charlie, you want to pick up on programme design.

Yes, in a number of ways. I might bring in Mr Baker in a moment to say a bit more. As I said, we will have an element of certainty to give a bit of a longer-term approach when we have our settlement from the spending review. We are also looking to do this road map that will give an even longer-term—to 2050—view of how we move. We have been continually trying to balance the certainty against the change and we will continue to do so. Mr Baker can give you a bit more about how we work very closely with the sector to try to get this right. As well as SFI, we will be continuing with landscape recovery and higher tier and getting the balance right between those to deliver the outcomes. There will be somewhat more certainty when we have the next three years of money clear, because we have learnt a lot so far. Do you want to say a bit more on this?

Your question asked about recognising the positives and noting the wider downsides of some of those aspects, like the iterative approach. It is worth emphasising, just for a little moment, some of the real positives where we have seen a significant increase in the amount of take-up from farmers. We delivered an offer, which everyone agreed seemed like a sensible approach initially, sounded good in theory. We tested the bits in pilots and when we put it live into the field on a fairly small scale with six different actions, it turned out that in the real world there were ways that we could make it better. We got real-life feedback for our pilot programme for the stakeholders that we work with. Also this is where it is best, from actual farmers applying for it and saying, “Here is what you could do better”. As a result of the changes that we have made, we have radically improved the service that we offer, which is extremely important. You log on: does it work better, is it easy to apply for? It went from 20% of farmers saying our services were good to very good to being much closer to 80% in the most recent iteration of SFI. On the policy offer, as was touched on by a colleague, we have gone from a fairly modest uptake to a position now where over the last year or so we have seen significant uptake on those schemes. That has undoubtedly worked. The corollary of that though is people saying, “I am not quite sure if this offer is going to—is this the right one or will it change?” The way that we are balancing that at the moment is looking at whether we can make smaller live changes to the offer. For example, I think three times we have made some quite tactical adjustments in response to feedback to specific options, and that has landed well. That has not caused a brouhaha. Generally people have gone, “It has been helpful for you to communicate it”. We also have a bit of a hierarchy where when we are getting feedback there is a need for something to change. We first say, “Can we just communicate more clearly what the issue is? If not, can we change some of our voluntary rules? If not, should we change some of our mandatory rules? If not, should we look at something more fundamental?” We go through that hierarchy clearly. On the point about longer-term certainty, as Tamara says, a new Administration has come in. It is looking to review environmental targets, clarity on what its vision is for the land use framework and the longer-term food strategy. We are optimistic that after the spending review we will have three years of fiscal clarity and those big foundational pieces of the puzzle will have been settled. At that point I am much more optimistic we will be able to step forward and say, “Here is what the next three years looks like in some detail” and beyond that hopefully we can give a much clearer indication as well.

Yes, we have great data for a persuasive case to take part in the spending review, but you have seen that in the last Budget we got £5 billion across the two years to make progress on SFI. We have come down more sharply on delink payments, but that has enabled us to invest in the schemes. I think something that has been quite important is that there is political change, and there could have been a very significant change in the system. Part of the Government said it did not want to upset the apple cart, continuing with the three elements of the schemes that we have in place, creating that certainty. When we have further fiscal certainty, we can do more.

The way to achieving the outcomes is more than just about Government money and more about Government money that we give to farmers. There is a range of ways that regulation will play a part in ensuring that we are using our public money to leverage private money. Investment will be important and the way in which farmers and others change behaviour. There is a range of ways to deliver those targets, but investing in a programme that pays for public goods is part of what the transition is about and was clearly part of this Budget, and we got investment. We will be making the case in the next spending review as well.

The NFU is looking for £4 billion per annum from the CSR. People who look for certainty from comprehensive spending reviews can sometimes not necessarily get the certainty they want. Do you recognise the £4 billion as a reasonable ask?

No, not particularly. I cannot remember exactly where, but you can put all sorts of numbers on this. Sometimes numbers, as I say, are associated to what do you need—it is true more broadly on our agenda—to deliver some of the big targets that we have. But, as I say, it is not just about public money, it is how you use it, regulation and private investment.

We will come back to the detail later on. Henry, you want to come in on this.

Obviously confidence and perception are important for buy-in and Jonathan talked about the range of stuff that you have been doing to try to get that moving. Is that in response to what the report was saying, particularly about in October 2023 only 35% of farmers being confident in DEFRA’s ability to deliver the schemes and regulations and a lot of that being down to your caution about sharing information? Alistair has already touched upon it about the land use framework, for example.

I will bring in Jonathan. There is a number of things there. The report praised the programme as being quite unusual in the level of engagement that is in place. Unfortunately at one point we had a leak that required us to slightly reduce the level of engagement. I think that that had an impact potentially at one point when we were asking the question, but I will not pretend that we do not need to continue to try to build up trust in DEFRA, trust in the schemes. We track the data and we take it very seriously. We have seen improvements in people knowing what they need to do, but I would love to see their confidence ratings increasing. We continue to look at the ways in which we can engage. We are looking, and Ministers are looking, at greater transparency, including on how we are doing against outcomes or a value and various things to try to increase transparency, because that obviously improves confidence. I think you will see more being shared at that point and certainly with the land use framework, but you will say more about the way in which we build trust.

It is a point well made, and certainly the NAO report helped us reflect on the information that we have been sharing. Since then, on the point around transparency, we have put in increased reporting of, for example, the amount of take-up of our schemes. We are looking to provide greater context around that, which is take-up has been X and here is what that means for contribution or what we expected to see or what we need to see. It is also worth noting that the reason why you are able to highlight that statistic about 35% of farmers is because we have committed to every six months—when we are six years into it—publishing this big survey of field data. We will publish another version in February and it is an important bellwether for us and a good example of us seeking to provide transparency around the transition. A huge part of how we build content is as simple as turning up. One of my teams is the engagement team. We do a huge amount of going out to talk to and learn from farmers, and increasingly we have learnt where to go to make that work, how to work through partners to get our message out, for example working with vets or auction marts so they have access to information and they can provide it. A lot of it is provided through other people. Some people want to hear from a Government ministry and will join our webinars—we had 1,500 people last week on a webinar for higher tier—but other people will go, “No, I want to talk to farmers, I want to talk to my vet, I want to talk to other people”. We have expanded going out and engaging through those systems. We find that valuable and it supports what we are trying to do with some of our key messages. That is one of the ways that we can help with productivity by supporting farmers to access our schemes. If farmers understand what is happening, they understand what opportunities are available to them because we are being proactive in that, it is much more likely that we will see the changes that we need to see, which is why we are taking it so seriously.

The metrics are going in the right direction, scoring eight out of 10 for 28% in 2022 and that is up to 48% in 2023. It is going in the right direction but it is still poor, isn’t? Where will that be in 12 months’ time when we get the next set of figures?

On confidence?

Confidence. You must have a performance indicator on that eight out of 10 score, don’t you?

On that one in particular, our hope on confidence has always been that it would increase and stabilise. We recognise we are at the—

Increase to what though?

Compared to where it is. Our effort has always been—

Inevitably.

Up not down; that is the right thing.

It could only increase up, I would have thought.

It comes out in—

What figure are you looking to get to? You have gone from 28% to 48%; what is the next?

First, the answer to your question about when is we do it in October and April. I do not have a number I am seeking to get it to; it is about continuing to increase it. There will be external factors that knock it one way or the other.

This comes to my point about not quite being very clear about how we get from where we are to where we all want to be. If you do not have a clear set of metrics and performance indicators, how do you do that?

We do. If you are talking about trust, a performance metric that is seeing an increase is a metric and is a performance measure and you can hold it to account when it goes down, but we are setting ourselves the metrics about how are we doing against the outcomes that we are seeking to deliver. When the NAO reported previous to this report there was a very strong criticism that we were not setting out the outcome we are trying to achieve with this programme. That moves on considerably for the report in setting out smart targets. We have set them out and we will give more transparency about the trajectories we are setting, and you will be able to hold us to account for that. As I say, on the stakeholder sentiment the measure is an increase.

On building up trust in that confidence—you will have heard this at the Oxford conference and we hear it from just about every farming organisation that we speak to—it is the availability of advice. Sarah, you have some questions on advice and guidance.

I hear from farmers daily and a common gripe that is that the information and guidance from DEFRA simply is not accessible enough. How are you looking to improve the advice services to farmers during this accelerated period of transition when there are so many opportunities for farmers? Also, how are you looking to be able to provide that on-farm, whole-farm approach advice for farmers through this journey?

Let me start and then bring in colleagues. As you say, we have heard very much that advice is important. Advice does not just come from Government, and different farmers will take their advice in different ways from a whole range of experts and peer advice from farming groups. One of the things we are interested in is are there ways we can support the growth of that; that is important as well. We had the Future Farming Resilience Fund that provided a lot of advice and we have learnt a lot from that about the kind of advice that farmers need, and we have launched the Farming Advice Service. That is a comprehensive way to reach people through newsletters, webinars and a helpline. You talked about a whole-farm approach and the catchment sensitive farming advice is a clear part of that. That is provided by Natural England on behalf of Natural England, Environment Agency and the Forestry Commission, and that is on-the-ground expert advisers as well. We are looking at a whole range of ways, but we will continue to keep it under review because it is an important part of the picture.

You mentioned the Farming Resilience Fund, which has been broadly welcomed but the scheme will end in March. Why will the scheme end before the end of the agricultural transition and what will you offer in additional support after that date?

It was always intended to get us going on the transition, to provide advice but also to give us a sense of what is needed and what works best. We are getting a lot of learning from that in building the Farming Advice Service, so that is what will provide the advice but, as I said, some of the more comprehensive whole-farm deep advice from the catchment sensitive farming advisers.

As Tamara said, lots of learning was taken from the resilience fund, which was deeper and more intense. We have taken that and worked out what are the techniques that have worked and how can we apply that through other advice offers that we provide. We have taken that learning straight back up into the Farming Advice Service and catchment sensitive farming process. It has been a valuable three different versions of that scheme but for the reasons that Tamara set out, the focus is now shifting to these other offers.

Tamara, you mentioned the on the ground support and peer-to-peer learning and how valuable that is in the sector. I certainly can testify to that from my experience, but during this transition we need to be able to share that best practice as we move forward and improve skills in the agricultural sector. How will we do that at pace?

We are always looking at ways that further support that. As I say, the stuff that is in the Farming Advice Service is exactly about sharing good practice and making that accessible in a range of different ways that people might want to access it. That is the major way that we are supporting that. One of the things as we look at this is what more can we do to support peer-led support on farm and the groups that people trust, because they generally trust each other, and learning from each other. We will look at ways that we can continue to support that, but the Farming Advice Service is the major service.

To add a little bit of colour to that as well, there is a huge range of networks out there: AHDB runs the monitor farms and it does a huge amount of activity, Nature Friendly Farming Network. There are also the farmer clusters that have been extremely effective, kind of bottom-up, farmers coming together to learn from each other, as well as the fact that lots of farmers receive advice from a range of different people. What we are seeking to do as much as possible is to help those groups—and other groups like professional stakeholders who go out and talk to farmers—and give them the information that they need so they can deliver that with confidence. They will talk about higher tier in a way that is accurate, talk about SFI in a way that they are getting lots of questions from land agents. We then brief the land agents and say, “Here are the answers” and they can go out. That allows us, in a more efficient way, to embed the key messages and learning through the sector by working through other partners. That model has been effective. Part of the effectiveness is farmers are more confident talking to those people than necessarily me or others. They trust those people, they have relationships with them and they know their farms and their circumstances. That has been effective.

To reiterate, it is the accessibility that is important to that fact. There is also, going back to the Chair’s comments earlier, maybe putting in some KPIs so that we have something tangible to make sure that we can say from where we are we have that improvement to getting farmers on board to have that level of support and accessibility to that support.

The range of questions that we ask in the opinion tracker on whether people feel that they have the information that they need to inform their business planning is a key one, and that has been increasing from 27% in 2019 to 59% now. Watching that and ensuring it continues to increase will be a measure, and I cannot be sure that it will so it is an important one.

When was the last opinion tracker? The NAO quote the 2023 one because of the timing of their report. Do we have one from last autumn?

We shared the October ones. I realise that what I have here gives me the April 2024 numbers but we do have the October ones. It is public but we will make sure that you have it. Those are the April ones but we have October and April.

I do not want to go over old ground but clearly the point we are emphasising here is the resilience fund has been well received, we are accelerating the move away from direct payments and it is something we thought the Department might have considered extending, even for a little period more.

Do you think there is anything you can learn from practice in other parts of the United Kingdom?

Yes, there always is, and we have strong relationships because obviously different things are being done in different parts of the UK and we have very strong relationships—

About on-farm whole-farm advice?

On advice, it is, yes.

It is one of the things that I hope we will be looking at as we do the farming road map. Going back to the conversation about productivity, we will need to think quite sharply about what kind of support and interventions we do from Government to support the learning that needs to go on. For example, I chaired a roundtable a few weeks ago with Lord Curry where we were talking about how to get technologies adopted with a number of actors around the country. What I think is interesting in Wales, for example, is their agri-tech innovation centres where they are getting small businesses in and providing a sort of incubator and help. It is almost like a small business can have its own research and development department in Anglesey to go and work up turning potatoes in a field into a crisp business. Northern Ireland has similar arrangements. We should be looking at that and exploring those sorts of ideas. I think, having chaired this roundtable, that there are some very good initiatives happening in England as well and we need to work out which of those to back. We probably also need to be quite sector specific.

What is the Scottish model?

I do not know the Scottish model so well.

An organisation like SAC Consulting, for example, which is a spin-off of the agricultural college, is achieving what you are talking about; it is that relationship of trust, somebody who will hold the hand of the small farmer. It is not the people who have the resource to go out and engage a land agent, because these are the people who have struggled with the changes from the ending of basic payments to ELMs and SFI, aren’t they? Would it not make sense to provide something or to continue providing something that would help the people who need the help most, not the big guys who can always get it anyway?

If the objective of diversifying farm income is in part to bring parts of the supply chain on to farms so that you are not just producing the primary product but potentially doing some processing or marketing as well, that is the sort of support we might be interested in. It sounds like that is what they might be doing in Scotland.

Bringing the supply chain on to farms?

If you are producing potatoes and you are then able to turn that into crisps. I saw in Anglesey a few months ago flavoured gins. If you are able to produce a product that is going directly to market as well as producing the primary thing, that might be an opportunity for diversification.

Do you think that will assist many upland farmers, for example?

I think it varies by farm about what the opportunities are but I think we need to make sure that there is a range of things. It might be about using technology differently on farm, diversifying out of primary production into other food work, other incomes. We talked last week about planning changes that might enable using the assets on the farm in a different way.

It is all quite involved, quite daunting, isn’t it?

It is worth noting, Chair, on the resilience fund in particular that during the last year or so there has been a strong focus on accessing easy to omit farmers who perhaps, as you say, are the ones who are less likely to put their hands up. In the most recent iteration of the resilience fund we specifically adapted the contracts to say the sorts of farmers we wanted to prioritise and we have pushed them through the live contract management to demonstrate going out and engaging farmers who have not been involved. We certainly saw through some of the first iterations it tended to be the farmers—and this is a good thing—who always put their hand up for everything and get stuck in. We have done a push over the last year or so to make sure we have been accessing those farmers who, as you said, perhaps have different needs.

What overlaps are there between the 7% or 8% who you think will not make the cut and the bespoke on-farm whole-farm advice that you are able to provide?

There are layers of advice and people access different advice depending on how they wish to operate—

But if you have identified farms as being ones that will not survive the change, do you not have some obligation towards these people to offer them some help?

Yes.

Yes, definitely.

We did. One of the criteria is to target farms across the whole of the resilience fund but in particular the most recent iteration was to target the sectors and farm types who have the greatest need to make the transition, so those groups you specifically referred to, which broadly speaking are upland farmers and grazing farmers.

The most important thing that we can do is to set up good schemes that are accessible and clear advice as to how you access them. The Farming Advice Scheme is a kind of layer on top that allows people to ask questions and access in that way. Lots of other people, like the NFU or other groups that farmers will be members of, are also providing some of that support and advice. You will access it through a range of ways, including having conversations with those in your area who are more confident about it. As I say, I think we should look at ways in which we support that kind of peer learning. There will be layers of ways in which people will get their advice. We will continue to keep it under review but the Farming Advice Service, Catchment Sensitive Farming, is part of the offer. We need to make sure we have good schemes, clearly identified and good guidance on that, and we are getting that shaped by farmers.

I am beginning to understand why this causes a concern, and it does. Jenny, you want to come in.

Have you identified the 7% or have you just modelled that?

This is modelling, and the implication—to go back to it—is that those are the farmers who will have to do even more than the model assumed would be normal in take-up of the schemes or diversifying income or improving yield. For example, we know from that modelling that farmers in the uplands—

Yes, that is my next question.

—will have more of a challenge than some others. I wonder if Jonathan wants to say something about the Upland Working Group.

We can definitely touch on that. It is also worth noting that the modelling we are referring to is very similar to what we published in 2018 and 2019. The analysis has been out there and been subject to interrogation by external colleagues, academics, NFU and others, and shows the level of plausible change and so on. It is quite well established out there. In every sector there is a need to close the productivity gap while also continuing to push that vanguard forward. On the point about upland farmers in particular, the Minister recently chaired the first Uplands Task and Finish Group that we have kicked off. It is specifically focusing on the point that Tamara made about looking at our schemes and offers and making sure that they are as accessible as possible to tenant farmers. One of the routes to farmers responding to the transition, alongside rent, diversification and productivity improvements, is being able to access our schemes. Now that we have had a year of the office being live, we are doing a focus review to make sure that those farmers can access. There are often quite small, tactical, technical reasons why on the ground it can be a bit harder than we had perhaps thought to get into a scheme. That is what this group is doing, sponsored by Minister Zeichner and with stakeholder groups. That comes to the point that Tamara raised and where this iteration is a strength. We recognise that we need to get as many of these farmers the widest range of options as possible, and this is an example of us saying, “We’ve had a year of the schemes. Let’s dive into the detail and work out what more we can do to make sure it is as accessible as possible so that all farmers have the opportunity to make the changes and access our offers.”

Your modelling can also identify—as we have just talked about—the types, the regional variations and most likely to be affected and then target that, which is good to hear. You talked about 2018 and the previous report. Has there been much substantial change between 2018 and the data now that we are seeing play out and the likely impact for it? What is the change and the gap, if there has been one?

Broadly the theory still stands. The published documents I referred to set out the theory that a 10% improvement is necessary. That still stands and we have seen over that period that the key assumptions that underpin that have been supported. For example, we have seen an 11% reduction in agricultural rents, including in real terms. We have seen a 62% increase in farmers accessing diversified income, as Emily said.

In that period?

In that period. We are seeing—and this is a bit harder to get a precise figure on—productivity improvements coming through the sector. For example, through our farming sentiment tracker we have seen an increasing number of farmers who are saying, “I am making changes on my business” in a way that is statistically significant and shows that farmers are adapting. Finally, we have seen a significant increase in the number of farmers accessing our schemes. Those are the four aspects upon which our viability analysis is based and we are seeing positive realisation of those modelled assumptions over the last four years. But we heed that underactive review and we are not assuming, therefore, that everything will be completely as modelled. That is why we keep it under review and we target our support alongside it.

Model data will be as good as the data you put into it. Charlie, do you want to pick up some points on this?

You never have all the data that you would quite like. The NAO report referred to that we had the data from the basic payment system and we do not have that in the same way any more, so that is a kind of loss. The truth is that that was never as complete a picture as it perhaps seemed to be. We have quite a lot of information—as Jonathan has talked about—on farm incomes, on take-up of schemes. We are continuing to improve that but we think that we have that and since the NAO report we have continued to improve the data that we are using.

One of the real value-adds of the NAO report was the observation about we have our smart targets and making sure we are able to track those in a meaningful and structured way. Since the NAO ran its report we now have a comprehensive set of smart targets, a set of what we call trajectories, and our fantastic analytical teams have been able to broadly speaking say, “We need 300,000 hectares of species recovery by a certain time period”. We are now able to track what we assume that means for take-up of our schemes. We can provide quite live read-outs of individual actions and the extent they are contributing towards our outcomes. One of the things that we have discussed with Ministers, and following the refresh of the Environment Improvement Plan, is that we will look to publish more routine information that has been requested by stakeholders specifically on that, which is, “Where are you? Where is that against where you wanted to be? Where do you need to go next?” I think that is important obviously for the Committee to be able to interrogate, as well as other Committees, but also it is important for us to be held to account and demonstrate. Finally, there is also a point from talking to farmers that they want to get a sense that this transition is working and it is being effective. Where we can provide that assurance and show that we are moving in the right direction is important for building trust and engagement. There is no point getting stuck into schemes, from a farmer’s perspective, if you do not get a sense it is making a difference. That is an important motivator. We are discussing what can we do at a national level, that is evidence based, to provide a bit more confidence around this as a useful and effective transition.

We do quite a lot on that. We have a group, the UK Agricultural Monitoring Group, that meets regularly to look at that. We use weekly data on what we think is going on and do pull in some of the data surveys, external reports and so on to ensure that we see how things are developing. One of the things we are keen on is to get the right balance of not asking farmers for huge amounts of data that we do not want to use, so we are trying to get that balance right, but we do have some very good data on farm incomes in particular that we use.

I am relatively new to the Department, I started in September, and I have been impressed by how when there have been very short-term issues—a supermarket that has suddenly not got access to a particular IT system or whatever—DEFRA is on it within hours and is getting good information from the retailers and other parts of the food system. It is impressive.

It was as an upside of Covid that we built very close relationships with a lot of people through the chain in that way.

Moving on then, Jenny, to the valuation of the environmental impact.

Can you update us on the progress of the full design of the 16 objectives? I believe they are not fully set and designed.

You had some of them set out in the annexe to the report. We have made a lot of progress since then of making them smart objectives and developing the trajectories that Jonathan was talking about, and what are the actions and trajectories to meet those. We are looking at what can we publish on that and our progress against them. That is to come, but we have made a lot of progress in developing that suite of the outcome measures and the actions that we expect will help us meet those. I think you said a little bit more about that before.

Yes, we talked earlier about the stakeholder experiences and the stakeholder voice. How is either the stakeholder experience or the stakeholder voice featuring in the development of those specific smart objectives, either in the co-design of them or the measurement of them?

They have been a key part of that design but do you want to say—

Yes, and I guess there are two aspects. For example, the Department recently published the species abundance index for the first time, showing mixed but some positive trends on that. That was the first version of that and that was very clearly presented back to our academic expert, environmental and farming stakeholders as a kind of first go, “Please tell us how we can make this better” ahead of the next offer being planned. We have done the same—for example, as I said, we have started to publish more routine data on take-up of SFI every quarter. As part of that, we recently did a set of questions for stakeholders like, “What other information would be helpful and how can we complement this?” That is where some of these asks have come, for us to provide a bit more contextual information so it is not just the raw data, a bit wider information. Stakeholders have definitely been involved in that. To come back to the point on targets, the engagement around that was primarily through Parliament as realistically that is the goal setting for the statutory targets. That was the process whereby those were set. Then through our setting of the programme and the first Environment Improvement Plan we said there is a headline target to restore water quality or this amount of SSSIs. We then did internal work across the Department to work out what could or should the programme deliver and what could or should be delivered through other means.

The Environment Improvement Plan has long term and interim targets and they are, as Jonathan said through Parliament and is a statutory process. It is is an incredibly important part of how we will deliver those environmental targets, and pick those, as you have in the report, we need to contribute to and how. Now we have developed trajectories as to how we will deliver those so that we can measure our progress against them. We will publish more on this. Ministers are very keen for that to be more transparent. We have made huge progress since the report, but if the NAO was writing a report today it would say that it wanted to see us publish that. It is our intention that there will be greater transparency.

What is the timeline for that?

I do not have a timeline for that. Ministers are considering what they want to publish on a range of areas, but they want to see greater transparency, including on this. I do not have a date on that yet.

When do you expect to know a date for that?

To give you a date—I don’t know.

Or to know when the date might be, rather than a specific date.

I think it is particularly caught up around the Environment Improvement Plan, so obviously that is—

We are doing a review.

Yes, so it is part of that review. The intent is post that review to then work out how we can improve transparency around reporting.

You will see more in the first half of this year, I would say.

Thank you. The apex of the goal is to achieve thriving plant and wildlife. I believe that we are expecting more details on how we deliver thriving plant and wildlife by March this year; is that correct?

The species abundance target is the apex target on our environment goals. We have out already a draft way in which we will measure that, which we are consulting on. We will say more this April.

That doesn’t include detail of pesticides, is that correct, or is that covered separately?

Pesticides is separate, but we are doing more on pesticides in a pesticides action plan, which is also in the coming months, I think in spring to summer.

It is the first half of the year for all the detail on that?

Yes.

More generally, the aim is to support 65% or 80% nature-friendly farming and farmers have to adopt it on at least 10% to 15%. What do we understand as nature-friendly farming? I appreciate that you have set out those 16 objectives and you are saying that you will have objectives within those, like your specifically defined outcomes, in due course.

Objectives of how we will deliver those outcomes, what might be interim ways of measuring our success against them, but for that to happen we know that we need to have the vast majority of farmers in schemes. We have said for some time that we regard that target as not as good, but saying we want to get into schemes. It is 80%, isn’t it?

Yes.

Not that that has gone as a target, but that was our major thing, which was, “Let’s get people into schemes”. Correctly, previous to this, the NAO has criticised us and said, “Yes, in schemes, but to do what and to achieve what?” We are basically adding to that in much more detail by saying, “We want them to be in these sort of schemes to deliver outcomes” and that will say more about how you will know if we are on track to deliver the outcomes.

That is nature-friendly farming, effectively? You want people to come into those schemes and then within those schemes, you set up those 16 objectives, and that is what you define as nature-friendly farming?

On the very precise point around nature-friendly farming, there is a specific metric, which is—as you have described—65% to 80% of farmers having 10% to 15% of their land in nature-friendly farming actions. We know precisely what we are referring to when we say that because that target is a very good example of an output target that supports the species abundance target, but the actual delivery of that looks like creating habitat on-farm and it looks like making food sources available. The output target we are talking about is an extremely important one for generalist species and farmland-specific bird species. The answer to your very first question is yes, we do have a definition for that action, for that target, of what we mean and what actions. That is a good example of one of those trajectories that we can form, that in a certain given period a certain number of farmers have applied those actions and we can work out whether or not we are on track. We can then go, “Well, this action we are doing better; this one we are doing less well. Let’s make some changes.” Yes, we do know the answer to that question.

For you to know what you mean is a good start, but surely what matters is that the farmers and the land managers should know what you mean. That is a problem at the moment, isn’t it?

On that specific point, we know there is a question about clarity, about exactly what we mean precisely. A lot of the advice work that we have put out and the sources of advice that we have talked to that we have referred to are very clear when they work with the farmers on what good looks like on an individual farm case. I think a lot of the delivery of this stuff looks like farmers taking professional advice or taking peer-to-peer advice or engaging with Government advice and working out what good looks like. That is one of the big areas we have seen most recently that we have been focusing on. For example, over the summer, we developed a set of products in response to feedback from farmers. We said, “These are the sorts of actions that you could do on your farm if you are just getting started; these are the sorts of actions that more experienced farmers are doing for grassland and for arable”. We tested that over the summer and that sort of product was very helpful. That is the way in which we are trying to give farmers greater clarity on what good looks like on their farm business, but we are also really clear it is for them to determine and take advice, rather than us to say, “Here is what you must do”.

It sounds like the sort of thing that would be useful to have a land use framework for.

Yes.

Seriously, do you see the land use framework as shaping this work or does this work shape the land use framework?

The land use framework will shape this work. It will set out the principles and the approach and they—

Is part of the problem you have in getting from here to there that you do not have that overall strategy in the framework?

I think we are on track to have the framework and that will help us to shape—continue to shape—the schemes. The next three-year period will be the key thing that we can bring together with the land use framework to set that out.

But in the meantime, the farmers at the sharp end are now finding that they are being pushed off the cliff with the ending of basic payments. I am not getting any sense that there is a great deal of urgency in helping them through that.

Let me just say something. There absolutely is. We have designed schemes that are absolutely consistent with where we want to go in the land use framework. We are putting considerable money into them this year and next. I would describe those schemes as seeing good take-up. The reason I am talking about this next three-year period is that we have to have certainty around the money to go with the land use framework and the framework of outcomes that we now have for the programme, which we did not have in quite the same way. This is a huge and significant programme for us. We cannot deliver anything that DEFRA has to deliver without this sector making a huge change, which we do not underestimate. It is very significant, which is why we work so closely with them. There is urgency and commitment to do that. The land use framework, the food strategy, the review of the Environment Improvement Plan and the road map are all parts of that picture.

Following the discussion we have been having about the environmental objectives, I want to touch on some of those higher impact actions and how they could be optimised. In the agricultural transition plan that was published around a year ago, DEFRA acknowledges that the environmental land management schemes needed to be more targeted. You have already started some work on that, for example bringing in premium payments for certain actions that have higher environmental incomes, but the plan was a bit vague about the timing of any further moves, so I think the picture is a bit uncertain there. Could you tell us if and when you plan to introduce any more targeted and ambitious actions to achieve those environmental objectives?

I am happy to come in on that. We completely recognise the NAO report had an implication that the focus has only been on SFI and those wider offers, which is worth noting are extremely important. As your colleague mentioned, a water quality target is very hard to deliver. An SFI is completely essential to delivering that, the same as the target that you just referred to. You need SFI to deliver that 65% to 80%. Yes, we completely recognise and have made a huge amount of progress on those more complex locally tailored options. On landscape recovery, we are now at over 50 projects through rounds 1 and 2. The way that scheme works is you have two years of development, bringing farmers together, writing contracts and working out what you want to do, which is very complex, deep work. The first of those projects have now written to us to say basically that they want to move to the development phase. We are hoping that about half of that first round will have done the same by March. I think there is 600 kilometres of river we will be looking to restore through that first round. In the second round, it is something like 200,000 hectares of habitat. These are very significant projects. We have the best part of 1,000 farmers in them delivering very high-vision schemes. That is certainly making progress and is ahead of schedule in some ways, because we have seen this level of demand from farmers that we have risen to and responded to. On the higher tier offer, which is where it is more locally bespoke tailored actions, often happening on SSSIs, we confirmed in December that we will carry that scheme forward. We put in place a range of improvements, rolling application windows, which makes it easier for us and farmers to administer, simpler and more flexible, and added some additional actions and improved those. Natural England and the Forestry Commission are out and about at the moment talking to farmers as part of the pre-application for that process and in February we will set out further information about how we will get those farmers in. We confirmed that about 1,200 farmers will be able to get into that scheme in the period it will be open from the summer. On the premium payments in SFI, there were 20 actions where we slightly increased the payment rates because we had seen historically that farmers tended to not engage in those actions, often because they required land use change and more permanent changes to farm practices. Our assessment is that those premiums have been effective, they are delivering value for money and we are seeing an increase in those actions compared to what we would have seen otherwise. It is a question for Ministers as part of how SFI and other schemes will evolve and whether we introduce more of those or not. Coming back to the Chair’s point about the land use framework, that certainly will help us for the more targeted schemes because it will give us a framework within which we can start to prioritise and target.

Okay, great. Some stakeholders have expressed concern that in allowing farmers to have a free choice from a really big range of actions, some of the environmental objectives might not be realised. You have mentioned Natural England. We have talked in the past about it potentially—or its lack of advice—being a bottleneck for countryside stewardship in particular. What are you doing to manage the risk that, for example, SFI could crowd out other schemes that have greater environmental benefits, might be costly, might be more complicated, but they have greater outcomes?

We have the outcome. That is what we are trying to achieve, so we will look at the balance of the schemes to try to achieve those. As Jonathan said, using premium payments so that you get greater take-up on moorland, grassland, peat and agroforestry actions was one way of doing it. The point of SFI though is just to bring people into the scheme to start doing some actions, because all the evidence is if you start doing some actions, you are then open to looking at other actions that you might be able to take. It is trying to get the balance right of getting something, which is SFI, to bring everybody in, pay a premium for some of the other actions, but very much also having landscape recovery and higher tier in place. One of the reasons that we iterate a bit is how you best get that balance right to achieve the outcomes and get the certainty. It is difficult to do, and we tried to do it with farmers to try to get the balance right.

Lastly, before the election, this Committee reported on soil health. One of the things that was mentioned in that report was the pick and mix approach between SFI and countryside stewardship could limit some of those environmental gains. The recommendation was that environmental land management schemes incentivise combinations of SFI and CS actions that essentially dovetail to produce cumulative environment gain. In my neck of the woods, that might look like a farm combining the SFI action of planting pollen and nectar mix with the CS measure of managing lowland heathland, which is a very crucial landscape in our area. Does the Department have any plans to incentivise the combining of SFI and CS for those actions that would work well together?

The SFI expanded offer brings the countryside stewardship and SFI together and then separates at a higher tier. In a way, I think we have responded to that. I don’t know if there is anything additional.

It is worth reflecting that the SFI offer that was launched in 2022 had the idea—which made a lot of sense at the time—that packages of actions needed to be done together, specifically focused on soil. We saw the uptake of that. Although a good idea, which we had tested and seemed sensible, the reality was it just wasn’t delivering at the scale that we needed. The requirement to do certain combinations of actions at certain levels always risks the iron hand of Government saying, “Here is what you must do” and that just not quite working for farm businesses. We are open-minded about that, particularly as schemes evolve over time. Tamara talked about that as more and more farmers come into the scheme they get greater confidence because they have been doing it for a couple of years and they can get access to wider advice. Our current focus for that kind of combination is to focus on advice, support and communication, but over time it is one of those things that we will always look to advise Ministers on. Going back to the point before about higher tier, I forgot to mention this. I think about 25% of the actions that are currently in SFI were formerly higher tier actions. One of the things we did in designing the current offer is we looked very closely with Natural England and others and said, “Are there actions that we can move from this scheme, which are more complex to administer and require an expert to sign off? Can we move them into a scheme that is much more flexible and self-service?” We have done that. There is the premise that there is SFI, which does the less good stuff, and the higher tier, which does all the fantastic stuff, which is not quite right in reality. They are different delivery mechanisms, rather than one delivers different outcomes. That is how we have delivered them, so we have seen quite a big increase in some of the take-up of actions that used to be in higher tier as a result of the delivery change.

That is very promising. I understand that you would not want to specifically group things together and force farmers down a certain route if some actions are deliverable, but others are not, and they feel like they have to do the full package. Through the advice, is there encouragement to go to the next stage? You say you have people through the door with SFI and maybe you have them on some of the higher paying actions. Does the advice then guide them through the process of maybe going into countryside stewardship or the higher tier to again get the greater environmental gains that maybe without the advice they would not take up?

Definitely on the intent, one of the key metrics for that advice in helping farmers undertake the right measure of activities. With the RPA we have 45,000 farmers in agri-environment schemes and that is a huge community who want their schemes to deliver well. One of our shifting focuses has been how we can help those farmers in schemes understand how to comply and how to comply in a way that is better for outcomes. That is where, for example, we are doing video case studies and “how to’s” by farmers at the right time of year to give a bit more of a push so that farmers say, “I know I need to do this. It is the first time I have ever done it. Can someone help me?” But yes on the point around advice.

The only other thing I will add is the farming road map. With farmers, we want to be thinking through what sort of further adjustments we will be making to schemes. They may be things, as Jonathan referenced, like in the light of the land use framework, where certain actions need to be particularly targeted in certain areas. We may want to review whether there are a certain minority of actions where we think they are less value for money compared to the ones that are particularly high value for money. Do we continue those? We may want to think about the payment rates again just so that we are incentivising the right kinds of schemes. It is that sort of thing, with feedback, that we want to adjust. The question of bundling actions has a complexity for delivery, which makes it more tricky, but the emphasis in the last year or two has been about trying to open it up and make it available and flexible so that we are encouraging people into the space and then we will build out from there.

Moving on to compliance and regulations. Jenny, you wanted to pick this up.

Your report highlighted that DEFRA is taking actions to improve environmental regulation of farming, but it also says that farmers’ compliance with some aspects of the current regulation is low. Are you collecting data to understand what that level is for compliance? Are you collecting data and can you tell us where that compliance is low specifically?

On complying with regulation, we wanted to make this part of the change a shift in regulation so it could be fairer and clearer and more effective and bring people into compliance with advice. As part of that, the Environment Agency has been doing a lot more, because we need to ensure that we are doing the inspections and the enforcement. The Environment Agency has massively increased the number of staff involved in that inspection; I think quadrupled it since 2019-20.

The number of staff?

The number of staff and also increased the number of farm inspections. We had a target of 4,000 for the year for 2024-25 and are reaching that, so that is one of the things. That has led to a number of improvement actions, I think 21,000 of those, and 13,500 of those have been completed. That is one of the ways in which we track how people are doing in complying with regulations.

Can I bring you back to my original question, which is: do we know the level of non-compliance and do we know where that non-compliance is with current regulation?

That is what we get from some of those inspections. Then we know that a number of actions are required and we can track the number of them that are needed.

But the Department doesn’t currently hold information or data on the level of non-compliance; is that correct?

We do in that we do that through inspections and seeing what levels of action need to be taken on that.

The Department would know the level of non-compliance? I am not clear on—

I don’t think you would expect the Department to go to 100% of farms to check everything. That would not be a good use of inspection resource. The inspection resource that the Environment Agency has will be targeted at the areas where it suspects non-compliance. That will be informed by a sense of risk and intelligence, which I imagine will be a mixture of reporting and data and previous compliance history and so on. It will be nuanced and then it will make decisions about where to put its inspectors to go and find non-compliance.

The Committee’s last report, which my colleague referred to, suggested that it was about 4% of inspections that take place. Is that figure still accurate?

I don’t recognise that figure, but there was a concern about the number of inspections and we got the investment to put into the Environment Agency to significantly increase the number of inspections that happen. They have been happening, so we are on track to do the increased number of inspections that we committed to do to improve compliance, as well as investing in more cost-efficient ways to do those inspections using drones and so on, which has also proved quite effective. We are continuing to build up our capability and capacity to do those inspections, but they will always be done on a risk-based approach to compliance. I think we can say that we have made a significant step forward in our enforcement activity.

To be clear, the last Committee’s report said that the numbers showed that the Environment Agency was visiting just 4% of farms every year. That is in its published report. I think what you are saying is that that level should be higher, and that level now is higher, given the investment that has been made.

I am not aware of that number, so we might have to come back to you, unless somebody here knows.

It depends how you define farms. I think the Environment Agency visited something like 3,500 farms in the last year, so it depends what the total number of farms is that you are taking that from. That might be around 4%. The thing is it will be visiting different farms each year and it accumulates and so on, so I think there is a question about what level would be appropriate. To me that sounds like it has at least improved from where it was before.

Have the increased inspections been done in accordance with your advise and prevent approach rather than detect and penalise?

Yes, absolutely. The other aspect is the role—

What sort of enforcement is coming out of that?

There are improvement actions issued and then there will be some enforcement notices. For example, there were 78 enforcement notices and 13 prosecutions between July 2021 and December 2024, so I would say that is reasonably low. Warning letters are over 1,000, but that is then improving compliance.

Is this not something else where it would be very helpful to farmers to have access to good quality advice? It is an absolute nightmare for most farmers, isn’t it?

The posture of advice versus enforcement definitely needs to be more towards the advice end. I think that most farmers want to comply, want to get it right, and it is just about being informed and being willing, rather than about being unwilling or ignorant.

On having access to the detailed requirements of regulation and legislation, are you looking at the use of artificial intelligence?

At one of our workshops at the Oxford farming conference I was talking to someone who was doing exactly that, basically using AI on some of our guidance to create a different way of accessing it, which is very interesting. There will be improvements of that kind, but as ever in these conversations, we also have to be where farmers are at. Some will be comfortable with using that kind of tool, others will not, so that is why we have the range of ways in which we provide advice. On the regulation, it is a significant strand of the programme to shift our regulation to be an advice-based inspection, not about the punitive inspection.

Otherwise your increased level of inspections just leaves farmers feeling, “Here is somebody else coming along to tell me what to do”.

For the RPA and the EA, a massive change in that culture and the ending of cross-compliance was part of that. The inspections are very much advice-led. They lead to actions that are required and then we assess those, because we need to look at those, but it is very much the nature of our enforcement activity.

I have a family member who works in this area. Jenny, do you want to lead on the future farming budget?

Yes, thank you, Chair. I suspect the answer to this question is along the lines of, “Not very”. How confident are you that you will be able to meet your current spending funding commitments in the next financial year, in the next funding round?

We know what our budget is post the Budget for this year and for next year and we know how we can use that. You have seen the way in which we are approaching that, which is taking our payments down faster and investing in agri-environment schemes so we have real certainty over planning on that basis. Now we are preparing for a spending review that will happen in June, which will give us certainty over the following years. In the Department, this budget and flooding are our two major budgets. It does a lot of work, because it is transitioning the farming sector and is totally critical in delivering our environment targets, so it is a major part of our budget.

Where are the pressures that you are facing and where are the areas that you are scrutinising for future investment and funding?

We have to look right across as we prepare for the spending review, which will take a zero-based approach to all of our strands of funding. We will be looking right across the Department to the efficiencies that we need to drive. A particular element is how we invest in our digital and technology to give better service to customers and improve our efficiency, so that is a major part of the work that we are looking at as well. We will look at where we need to prioritise.

Does AI feature as part of that? We just talked about AI briefly, but does that feature as part of that?

It is very much a part. We use AI in various parts of the Department at the moment. Some of the challenges in using AI is the infrastructure that we have in place. We have quite a task of a lot of legacy infrastructure that we needed to evolve, and we spent quite a lot of money on that. Then there is the state of your data, so we are doing quite a lot of work ensuring that the data is in a form that allows you to use AI. There is huge potential for that, so we are absolutely looking at that as part of these changes.

Has the Department looked at the impact that some of the quite fast closures of grants has had? Will that feature in your thinking for future spending, where it is deployed and where it is not, so the impact?

On the capital grants?

Yes. The concern has been that some of these grants were closed with fairly little notice, which I am sure has not helped the confidence or the trust.

Yes, I can talk about that. I think I understood your first question to be about whether we were going to be spending the total budget that we have been allocated. Was that your concern, that we underspend?

Yes, if you can give clarity.

There is significant pressure on some of the budget lines in the farming space and capital grants is the one that is the most vivid. We have had to pause handling new applications. To give you a sense of scale, in 2022-23 we received 2,600 or so capital grants applications worth about £34 million. Between May and November this year we had over 8,000 applications worth about £382 million, so the scale of applications, the scale of uptake has gone up significantly and has caused significant pressure on that budget line, which is why we had to pause. I should emphasise it is a pause; it does not mean that it is closed forever. We will have to think about how we take that forward into the next financial year. The way that Government funding works is that we have to spend the money in the year it is allocated. We had a particular pot this year that was basically under enormous pressure, so we had to take some action to manage the budgets appropriately. We will again consider that for the next financial year. We need to manage within a particular budget, but we do want to make sure that farmers can access those schemes and do good work. The other thing on the SFI is that we are receiving about 600 applications a week at the moment. That has been pretty constant. It has gone up slightly in the last couple of months, not loads but it is a healthy level of applications. We have about 11,000 submitted at the moment, just over 7,000 offered. If that continues at that scale there may come a point where the budget comes under pressure and we have to consider taking action. At the moment we are okay, but we are keeping a very close eye on it. We are in a different situation than we were in last year, where the budgets were underspent because of uptake.

Can I go back to the main capital grants scheme? It was met with some frustration. What notice was given of the closure of the scheme?

We didn’t give a lot of notice. We basically confirmed it overnight, but I think there were rumours that were circulating beforehand because people were not getting responses from the RPA. If we had given more notice there would have been a closing-down sale, to use a colloquial term, so there is a question about how we do that. I think we could do better in future. It is the first time we have been oversubscribed and we need to learn about how to do that better.

In October we announced the acceleration of the abolition of basic payments, so how much of the increase in applications came after?

It was before.

It was before?

Yes. It was not linked to the BPS.

On capital spending overall—this is obviously a question as a new Member of Parliament—are there underspends in capital budgets that you can steer across to other schemes?

In theory there could be. This year I don’t think there will be.

We are quite tight.

Yes. We are keeping an eye on it.

Okay. Henry, management of the programme.

The Infrastructure and Projects Authority highlighted the external factors that are presenting risks. I appreciate there has been a lot of change. For context, I think it is September 2023, but if you could speak to that. It also highlighted the need to sharpen your future plans to ensure that the programme stays on track. Can you talk to that more generally?

We find the input from the Infrastructure and Projects Authority incredibly helpful. One of its reviews was mentioned in the NAO report and there has been one since with a similar conclusion. That helps us to do what they say we are doing right. We need to do more in governance and the decision-making process. We have strong leadership in place and our stakeholder engagement is good. There is always a risk to major projects of this kind from external factors, one of which is the position on trade and to get a bit more clarity on ensuring trade deals are positive for the sector. Political change clearly was a risk. This Government came in and, as I said, made the point that they didn’t want to upset the apple cart of the basic structure of the programme and so on. That has been helpful for greater certainty there. We identified the external factors using our risk management to ensure that we are mitigating and managing those, but those are always going to be risks that we have to manage. I think what has been helpful is that the things that we have control of within the programme are being managed and led well.

What kind of contingencies do you have in place in respect of managing that risk?

Managing the set of risks? There are certain things where we are dependent on other Departments, changes that might happen on planning or on trade. It is the relationships we have and ensuring that what matters for this programme and the work of the Department are understood by other Departments. That is part of how we manage those, so those other decisions are not made with a lack of understanding of the impact on this programme, for example. There are clearly bigger issues around climate and biodiversity risks where we take a whole range of measures to try to mitigate the impact of those. That is another impact on this sector and on this programme, so there are different categories of risk that we manage and mitigate.

Sarah, did you want to come in on flooding or has that moment passed?

Yes, it is linked. I was very pleased to hear you talking about the amount of capital funding that is going into flooding. Somerset is always on the frontline of flooding, which results in huge amounts of loss of earnings. Linking this with the management of the programme going forward, given the concerns over DEFRA’s funding in the future following the autumn Budget, does the Department understand why some farmers lack confidence in the sector? The programme overall at the moment is in amber. Obviously farmers are integral to building the programme in the future. How are we going to try to deal with those conflicting issues around farmers having confidence and delivering a green-rated programme in the future?

It is quite challenging to shift this programme to green because we are managing very significant factors, but we are obviously looking at what the path is to green. Clearly greater certainty, but one of the things—another external factor—is the outcome of the spending review and so on. When we have that, a bit more certainty and the land use framework we have talked about, maybe the next time around we can get to green, but it is quite challenging to do. You also talked about the impact of flooding and obviously we have had some significant storms that massively affected farmers. We have been providing some funding as a result of that and also big investment in internal drainage bores, which I know is also very welcomed by farmers. We are looking at the flooding infrastructure investment programme at the moment and obviously impact on farmers will be an aspect of that as we continue to shape it.

Moving on finally then to everyone’s favourite subject, the IT systems. Josh, do you want to lead on this?

Thank you, Chair. It is one of my favourite topics, to be honest. We have talked in the context of the budget and the usage of AI. You referenced legacy infrastructure, so can we touch on legacy IT systems? The NAO identified this as a risk in the delivery of existing agreements and payments to farmers. What progress have you made on putting in place a new contract for the rural payments IT system, which as we know is about to expire?

We have made a lot of progress since the report. As you describe, it is a critical aspect of the programme and one of the things that we want to ensure—and it has been the case—is the experience of farmers in accessing the system and that the speed of it is good. One has been ensuring that we have our existing systems in the right place. We needed to do a procurement exercise, as highlighted in the report, because we were running out on our contract. We awarded a contract to Abaco, which was the existing system provider, following a full exercise, and that starts on 1 February. We have the three years of that contract. We have also, over the last year, done quite a lot of replacement of servers and storage hardware, a number of things to deal with some of the legacy issues. That is some of what we have done to get the existing system in the right place infrastructure-wise. We have also introduced quite a lot of software technology improvements with new components, upgraded the payments system and developed some new smoother user pathways in the software. The question is that we have three years on that procurement, but that basically gives us the time to build the successor system. We have done the discovery and completed that just at the end of December, so we are developing the alpha and then the beta of that, because we need to have that in place by 2027-28. I am feeling quite confident that we are doing the right things to get a good system in place by the end of the period.

The awarding of that three-year contract enables you to develop the schemes further. It is not just about continuity of payments; it is also about continued improvements, which it sounds like you are making to hardware as well. That is very positive. On the timescales here, from what the report stated the need for a new system was flagged five whole years ago and there then seems to have been a gap of around two years before the procurement process properly started. We are now three years on from that. You said you are well under way with that work now, but why did it take so long to identify that need and take action for getting a new IT system?

It is an absolutely reasonable question. Early on in the scheme we considered whether we should use the SITI Agri and build on that, which had lots of problems around it, or whether we should build something from scratch. We spent probably too long worrying about what we should do on that. The history in the RPA and the Department fed into that on the massive risk if you are trying to build a new scheme and build confidence in it, of the risk of not being able to do the IT well. In the end, it fed into us to rely on SITI Agri. During that time we have been working on, “Well, what does a successor look like?” but we ran out of time and therefore needed to do this procurement process. It is a reasonable criticism. That was a very difficult decision to take, and during that time we had quite a lot of change of leadership and so on. That fed into that a bit, but I think that we are now on an even keel on what we should be doing. We are not going, “Oh well, we now have three more years”. We are using that time to build the system that we need to build and hopefully do that well.

Okay, great. Briefly, could you just touch on the benefits that that new bespoke system will bring maybe for administration or even cost savings, based on what you have now?

We want to have a system that is speedy in giving the answers that farmers need and is very easy to access, in the way that you would expect the modern interface with any organisation to be. I think we will see considerable improvements. I am also keen that we look at it and ask how we can structure the data that is in it so that we ensure that across the DEFRA group, where we use data around land a lot, we are not reinventing and that when someone looks for a permit we are asking for information all over again. Hopefully we will structure the data in a way that we can use it more effectively and that gives all the optionality around using AI and other improvements. It will be quite central to the way in which we make improvements to how we deal with customers right across the DEFRA group.

Can I give a couple of illustrations? When I arrived in September, for the SFI there was a little team—I think about eight people—in the RPA who were going through each application and just double-checking that the actions that had been applied for you could have coherently between them and that there weren’t farmers who were applying for something they could not apply for. They managed to put in an IT change in September, which now means that is all done in an automated way. They are incrementally doing that all the time at the RPA, trying to improve the efficiency, which means that we are now at the point where we are doing a 24-day turnaround time for SFI applications. In fact, for the previous scheme, the SFI23, it was more like nine days because it was a much simpler scheme. Now that we have 103 actions, it is a bit more complicated, but that is the sort of thing we would expect to improve with the new IT system from an efficiency point of view. Another example is the customer space. I am in charge of both the RPA and the Animal and Plant Health Agency. They have different approaches to how they relate to livestock farmers and I think have different tags for them. The RPA system is harder to change. With the new system, we can align those better. Another example is with geospatial information, where the country parish holding number is particularly key from a data point of view, but the Environment Agency uses a different way of tagging land. We would like to be able to join that up, but we can only do that if we have a relatively flexible system.

Great. I think what you have just described there touches on a lot of the improvements that we have been asking to see. The IT systems might be boring, but I think they are crucial to a lot of stuff you need to deliver.

They are so not boring.

They are boring until they go wrong. Do you think that the Department is still a bit traumatised by the meltdown of 2015?

No, I think people have very much moved on. In preparing for the EU exit, we had to—with a tight and clear deadline—develop five new IT systems that work very effectively with customers and we did it very successfully to time and to budget. I think that massively increased our confidence on this, so hopefully you will see that confidence in providing a very good system here as well.

Subject to anybody catching my eye around the table, we have covered all the areas that we needed to cover for this morning, albeit that I anticipate—given we have been talking about a programme at amber—that there is quite a lot of material here that we will want to return to in the not too distant future. Can I thank you all for your evidence this morning? It has been greatly appreciated. I suspect there are one or two points that we will still want to follow up in correspondence, as is normally the case. I also place on record the appreciation of the Committee to the officers of the National Audit Office, who prepared this report. Their briefing has been very helpful for us, along with the Committee staff who, as ever, have done a spectacularly effective job. Thank you all for your attendance.