Andrew's insight into Rural manifestos, SFI economics, and carbon clarity
Savills Rural
Specialist advice and insights from Savills Rural across property, land and farming
In my view, these are the three most significant developments over the past month for farms and estates:
Read on to find out my thoughts on these topics…
What do the manifestos say on rural issues?
All the political parties have now published their manifestos, and there are few headline policy surprises. However, analysis of the manifestos reveals useful insight into the policy alliances and divisions that might influence what the next government can deliver for farming, nature, and rural land.
Net zero and environmental regulation has split the political spectrum. The Conservatives seem to be watching Reform closely on climate issues, including pledges in its manifesto such as reforming the Climate Change Committee to give it an explicit mandate to consider the cost to households and impact on UK energy security in its future climate advice. There is a definite break from the last government in terms of the role of nature markets. The Conservative’s promise to scrap nutrient neutrality and replace it with a ‘one-off mitigation fee’ is not a surprise, but the general muted emphasis on private finance for nature is.
In comparison, Labour has been much more forthright on green finance, promising in its manifesto to champion the role of the UK as a global leader in green finance. The Liberal Democrats are the only party to specifically promote the use of nature-based solutions as a critical element of future climate and industrial strategy.
The Greens, Liberal Democrats, and Conservatives all have eye-catching pledges to increase the amount of money available for agriculture. The Liberal Democrats commit to an extra £1 billion per year, whilst the Conservatives say ‘£1 billion over the Parliament’, which may imply £1 billion in total or a phased increase. The Labour Party is silent on the budget; instead, it pledges to make the Environmental Land Management scheme work for farmers and for nature.
For our full analysis of their commitments, see our briefing note covering food and farming, environment, natural capital, energy, infrastructure, planning, taxation, rural properties, and the rural economy.
Economics of the expanded SFI offer
At the Cereals Event, we published our Food and the environment Spotlight, which explores how farmers and land managers can respond to the challenges of producing food for a growing population whilst reducing their climate impact and facilitating environmental recovery.
In it, I worked with Tricia Singleton to help put these decisions in a commercial context by modelling the financial impact and viability of a transition to a regenerative farming system. Our analysis used the Savills Virtual Farm to show that the latest Sustainable Farming Incentive (SFI) options, carbon credit pricing and regenerative premiums help to improve the overall net margin by £250 per hectare compared to £49 per hectare under a conventional farming system. There is still a “transition gap” in the farm’s finances, as the overall net margin in year one of the regenerative transition is 10% below the conventional model, but the enhancements to the SFI have reduced the gap significantly compared to SFI 2023. Longer term, the model suggests the prospects for the regenerative system are better than the conventional system.
Now that many mid-tier Countryside Stewardship options have been rolled into the SFI, the 2024 version of the scheme is likely to be its most comprehensive offering and is close to fully mature (unless an incoming government revises it radically, although I think this is unlikely). It is, therefore, a good time to consider how the scheme fits with your business ahead of applications opening in late July. For more information about the SFI, see our latest Rural Research briefing note or contact Georgina Sweeting in our Food and Farming team.
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Three major farm carbon calculators agree to harmonise their methodologies
News that Agrecalc, Cool Farm Alliance, and Farm Carbon Toolkit will harmonise the methodologies used in their farm carbon calculators is significant for the agricultural sector and its emissions reduction journey. The stat that there are more than 60 farm carbon calculators in the UK has been frequently quoted – it wasn’t helpful as it led to confusion and encouraged inaction, whereas in reality, amongst them, there were three leading calculators in the UK for farm carbon baselining. They have now agreed to collaborate and are open to others joining them, so the way forward for farmers is becoming clearer.
Their joint work will ensure the most up-to-date and accurate tools possible and harmonise the methodologies and outputs of their carbon calculation tools. However, the outputs won’t be identical as they each have different specialisms. For example, the Farm Carbon Toolkit takes a whole-farm approach, whereas the Cool Farm Alliance calculator focuses on the footprint of individual crops.
Last year, Defra’s Farm Practices Survey explored greenhouse gas mitigation practices and found that 48% of farmers in England were taking action to reduce greenhouse gas emissions. Of those who aren’t, 23% said it was due to a lack of information, 33% a lack of incentive and 44% were unsure what to do as there were too many conflicting views on the issue. If the joint work increases farmers' confidence in the calculators and clarifies which to use, it will be an important step forward. Strengthening the argument for why they should be used, then becomes crucial. Defra’s research suggests that most practices to reduce greenhouse gas emissions could save farmers money, and changes that make good business sense are more likely to be made. Clearly highlighting the business case and/or enhancing it with additional public or private incentives should help start the ball rolling.
Summing up…
The party's manifestos provided useful clarification on some issues, but there is a lot of scope for interpretation in other cases. There is also the question of how much to read into the omission of topics from their manifestos. Environmental Land Management receives broad support, and based on our economic modelling, the latest iteration of its SFI scheme is likely to find more appetite from farmers, too.
Whilst some manifestos are dialling down their green emphasis to reduce the cost to voters, the direction of travel for farmers won’t change as food supply chains are gearing up to cut their emissions. Therefore, efforts to harmonise and simplify carbon benchmarking tools will be appreciated.
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AUTHOR: Andrew Teanby
ABOUT: Andrew is an Associate Director in the Rural Research team at Savills offering insight and advice on agricultural, environmental, rural property and land use issues across the UK. His responsibilities include rural policy analysis and market intelligence covering the UK farmland market. Outside of work, Andrew runs an arable farm in Lincolnshire.
This newsletter is for general information only and should not be considered professional advice. Savills accepts no liability or responsibility for any direct, indirect or consequential loss arising from the use of, reference to or reliance on, this newsletter or its content.