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Agriculture: Subsidies

Question for Department for Environment, Food and Rural Affairs

UIN 6739, tabled on 23 May 2022

To ask the Secretary of State for Environment, Food and Rural Affairs, what assessment he has made of the potential merits of applying inflation indexes to support payments and grants available to farmers in England.

Answered on

1 June 2022

We are not at this time planning on applying inflation indices but we will review payment rates for our offers so that they remain credible and attractive to farmers.

In light of recently rising input costs and price volatility around certain agricultural commodities such as nitrogen fertiliser, the Government is planning to change the way we make payments under the Basic Payment Scheme (BPS) in 2022. Eligible farmers will now receive their payment in two instalments - half from the end of July and the rest from December 2022. This will be a permanent change to Direct Payments that will remain for the rest of the agricultural transition. By doing this, the Government intends to inject cash into farm businesses, helping them to make business decisions sooner, with more confidence.

This builds on the increase in revenue payment rates for the Countryside Stewardship scheme to reflect the change in costs since 2013, which Defra announced in January 2022. The majority of payment rates increased, on average by around 30%, although rate changes vary from option to option. These changes affected around 30,000 agreements and show we are willing and able to respond as and when there is a clear case.

In March 2022, Defra began rolling out the Sustainable Farming Incentive (SFI) to recipients of the BPS. SFI will help with the costs of sowing nitrogen fixing plants and green manures in crops to substitute some fertiliser requirements for the coming season, as well as reducing the dependence on manufactured fertilisers which are impacted by the price of gas. Rising fertiliser prices highlight that we need to find alternatives and move towards more organic-based fertiliser products. SFI is designed to help farmers move to these new sustainable farming methods gradually - which will improve environmental conditions of the land, while building the long-term resilience of our food security and production.

The Secretary of State recently announced a range of measures in support of the current situation, such as delaying changes to the use of urea fertiliser to help farmers manage their costs and improving statutory guidance for use of slurry. Defra has also created the Fertiliser Taskforce - where Government and industry are working together to help improve market confidence and provide farmers with the information they need to make business decisions on fertiliser use.

Towards the end of this year, farmers will be able to apply for slurry storage grants, helping them to meet the Farming Rules for Water and reducing their dependence on artificial fertilisers. This grant will contribute towards the costs of covered slurry store construction projects, helping farmers to get six months storage capacity. We will set the rates based on our assessment of the market at the time, as is our usual practice.

Defra is supporting investment in technology and research to further improve productivity. The Farming Equipment and Technology Fund has offered grants of up to £48m to over 4,000 applicants - enabling farmers to invest in equipment, technology and infrastructure. We have also announced a new Adding Value theme - a £30 million fund helping farmers and growers to process, diversify and add-value to their products again using up to date market information.

The Government continues to monitor the wider context of global supplies that can impact farm income and productivity, as well as take-up of our agri-environment and other schemes. Defra will use the findings to inform our plans throughout the agricultural transition.