In a changing political landscape how do we continue to pay for woodlands, peatlands and biodiversity?

The inevitable has happened and personally I have been surprised that it has taken so long. The rural sector is finally, like so many other areas, beginning to see a wain in the amount of government investment that it has had the privilege to benefit from in recent years. That said it isn’t all doom and gloom. There are new and significant opportunities out there and the likelihood of more to come.

The intention of The Scottish Government, following Brexit, had been to emulate the EU legislation and deliver the same kind of financial assistance in so far as it could. It quickly became obvious that this could not be done and that there would have to be changes to agricultural subsidies. Brexit was then followed by COVID and governments both in Edinburgh and Westminster simply ran out of money. Public funding of all kinds was pared back.

One of the first clear signs came last year when Mairi Gougeon MSP advised that the funding allocation for woodland creation in Scotland was being slashed by 41%. This meant the Scottish Government would only be able to fund around 50% of its own targets for woodland creation in 2024/25.  This comes at a time when woodland creation, for biodiversity, carbon and timber is seen to be of the utmost importance. 

This meant the Scottish Government would only be able to fund around 50% of its own targets for woodland creation in 2024/25. 

In the last couple of months, it has been announced that future Peatland Restoration projects, so essential to ensure that the country meets its climate targets, have also been affected. Landowners will now be required to contribute towards costs. Initially, it will probably be in the region of 20%, not an insignificant sum for a £500,000 project and this could well increase in coming years.

The future for agriculture, however, looks a bit more positive. The Scottish Government has announced that 70% of future support will continue to be direct payments and linked to production. This has been seen as a positive from the farming lobby. The balance of funding for this sector, likely to be over £180m/year, will be for environmental measures and public services. It could provide a great opportunity for landowners who have both suitable land and the inclination to carry out such works. 

There has, however, been a significant and important change with regard to farming subsidies in the form of the Fair Work First requirements.  This will require the recipients of public funds to comply with a Fair Work First policy which includes, payment of the real Living Wage, as well as investment in workforce training and provision of trade union representation amongst other things. This is already a requirement for Peatland Code funding and is likely to become a requirement for any substantial public sector funding in the future.

There is hope on the horizon too. The Scottish Government has been trying to facilitate private investment into natural capital for some time. In August 2023 the Scottish Government engaged CreditNature to develop a biodiversity credit system to allow corporate investment in nature restoration.

There is hope on the horizon too....... In August 2023 the Scottish Government engaged CreditNature to develop a biodiversity credit system to allow corporate investment in nature restoration.

The market for delivering environmental goods is growing and a robust metric will be key to ensuring that what is delivered is trusted and therefore valued. It may be that this could develop with time and also play some role in how future farm subsidies are paid, particularly in relation to payments for biodiversity improvements.

An area where the Scottish Government has made head way with facilitating private investment into natural capital, is with the National Planning Framework 4 (NPF4) requiring a net improvement in biodiversity with regard to all major developments.  While not fully clear how this will be measured it is likely to be similar to the English Biodiversity Net Gain provisions and again will offer up opportunities for interested landowners to generate income. The principle is very closely related to that of compensatory habitat improvement, much of which is required across the Northern Highlands.

While this compensatory work doesn’t allow the landowner to create tradeable carbon credits, the improvements will help to offset the landowner’s internal carbon emissions and could generate attractive compensation payments for lost revenue from the developers.  This is at a time when the carrots of Woodland Creation and Peatland Restoration Grants are being reduced and the big stick of a “Carbon Tax” for large landowners is again being discussed. As such all methods of reducing carbon emissions and increasing sequestration should be considered.

Looking forward there is much to be positive about. Whilst still in its infancy and at present mainly restricted to landowners with deep pockets and passionate enthusiasts, rewilding (or nature recovery) will start to grow in prominence, and this will in turn create opportunity.

The smaller scale landowners should eventually be able to take advantage of third party funding and become able to deliver these types of projects. It could take the form of planning requirements through NPF4 or through the sale of natural capital credits perhaps along the lines of the CreditNature metrics. 

Let us not forget that private investment in soil carbon is already here and showing interesting possibilities. Add to this the moves for greater flexibility in the carbon units sector with the likes of the Hedgerow Carbon Code and progress being made with a Seagrass Carbon Code, and it becomes clear that it is not gloom but merely change that is afoot.

There is no doubt, however, that it is and will continue to be a bit of a minefield out there with both opportunities and pitfalls, so if you do have land to manage it is worth getting expert advice on what might be available and those here at Savills Rural would be happy to help.

George Hipwell MRICS FAAV Director at Savills Rural and involved with compensatory planting and restoration agreements

Samantha Skinner Restoration Ecologist and Natural Capital Consultant for Savills Rural

Andy Macdonald Head of Food and Farming for Savills Scotland

Ewan Reid Head of Savills forestry management, arboriculture and consultancy business in Scotland

Debbie Mackay Head of Scottish Residential and Rural Planning