Abstract
Results-based agri-environmental schemes look set over the years ahead to form core components of agricultural policy both within the European Union and the United Kingdom. Their level of ambition, however, raises specific legal issues, four of which will be explored: first, the governance dimension when ‘setting the bar’ for the unlocking of payment; secondly, potential regulatory and contractual responses where there is a failure to meet the mandated outcome; thirdly, challenges for tenants who enjoy insufficient security of tenure to achieve long-term objectives and/or who are subject to clauses in their agreements or statutory provisions which have the effect of restricting the use of the land to ‘agriculture’ as traditionally understood; and, fourthly, compatibility with World Trade Organization rules. While results-based agri-environmental schemes may be more complex to translate into practice than those based upon prescribed actions, there is scope for the law in both its regulatory and contractual forms to be enlisted as a powerful ally in their realisation.
Introduction
A tilt towards results
Agri-environmental schemes, with increasing focus on climate-change and broader sustainability objectives, would look firmly set over the years ahead to form core components of agricultural policy both within the European Union (EU) and the United Kingdom (UK). In the EU, it has been projected that 40% of Common Agricultural Policy (CAP) expenditure over the period 2021–2027 will be dedicated to climate action, 1 while the reformed CAP has also been considered capable of contributing materially towards the goals of the new EU ‘Green Deal’. 2 Similarly, in England, the Environmental Land Management Scheme (ELMS) has now become established as the ‘cornerstone’ of agricultural and land management policy in a ‘Green Brexit’. 3 The express ambition is to channel public money into the delivery of public goods, with focus on improving the health of the environment, ‘on a far greater scale than achieved under the CAP’. 4 As with the Green Deal, agriculture is to play a key role in the wider environmental agenda, consistent with its status as the primary form of land use. 5
Further similarities between policy development in the EU and UK may be found in the greater importance attached to results-based agri-environmental schemes. On introducing the latest round of reforms, the European Commission affirmed that ‘[a]ny new CAP should reflect higher ambition and focus more on results as regards resource efficiency, environmental care and climate action’, 6 while the original proposal for the CAP Strategic Plans Regulation emphasised that the CAP would link the eligibility of the payments to actual delivery on the ground. 7 In essence, there is to be a redirection of the basis of support from payment for prescribed actions to payment for prescribed outcomes; or, to adopt the words of the European Commission, there is to be a shift in emphasis ‘from compliance and rules towards results and performance’. 8 Likewise, the delivery of outcomes is to underpin ELMS. 9 This change in policy trajectory is in line with an extended role for outcome-based regulation in the agricultural sector as envisaged by the 2018 Farm Inspection and Regulation Review, chaired by Dame Glenys Stacey; 10 and it also sits well with an overall vision of support for agriculture through public payment for public goods (as opposed to payment upon an area basis). 11 Thus, when the Government in November 2020 published The Path to Sustainable Farming setting out the post-Brexit agenda for agriculture, it was unequivocally stated that a guiding principle would be a ‘focus on achieving outcomes’, 12 for which purpose pilot schemes had already commenced to deliver the evidence base. In this context may be highlighted the scheme funded by the EU and delivered by Natural England in partnership with the Yorkshire Dales National Park Authority (2019 Pilot Scheme), which covered arable farming systems in East Anglia and upland farming systems in Wensleydale, North Yorkshire, the final report being published in 2019. 13 Although this revealed much that was positive in terms of not only improved agri-environmental performance but also the potential for efficiency gains and high levels of farmer motivation, a series of challenges were identified, including the extensive training and advice which farmers would likely require and the resources which would be needed to verify results (notwithstanding that technology, such as remote sensing, might assist). A similar direction of travel is evident in Wales, it being proposed ‘to reward farmers for the delivery of outcomes rather than compensate them for the cost of their inputs’, with their being encouraged to regard such cost as instead ‘an investment in order to reap the reward of continued payments for the outcomes they deliver’. 14
It may be recognised nonetheless that such an approach is not new. In their 2011 Special Report, Is Agri-environment Support Well Designed and Managed?, the European Court of Auditors found best practice in ‘outcome oriented’ sub-measures whose implementation would to lead to results directly observable on the ground. 15 And, by the commencement of the 2013 reform process, there was already advocacy by the European Commission of a general reorientation away from payments for prescribed actions, 16 this enjoying considerable academic support. 17 Early translation from policy into practice could also be found in, for example, the agri-environmental scheme in Baden-Württemberg to support the protection and maintenance of species-rich grassland, extensively and traditionally managed; 18 the ‘Flowering Meadows’ project in the Bauges Massif in France; 19 and the Burren Programme in Ireland. 20 Yet, the more recent heightened focus on outcomes would seem to mark a conceptual sea-change in terms of agri-environmental scheme design. Not least, indicators have become central to determining the very character of support, replacing their earlier role as ‘key tools’ in what was essentially a ‘monitoring exercise’. 21 Thus, in the EU rural development regime applicable during the programming period commencing in 2014, notwithstanding the initial advocacy of a more results-based approach, common indicators continued to be regarded primarily as part and parcel of a monitoring and evaluation system. 22 By contrast, under the current CAP regime, as laid down by the CAP Strategic Plans Regulation for the period 2023–2027, achievement of both the general and specific objectives of CAP support are to ‘be assessed on the basis of common indicators related to output, result, impact and context’. 23 At the same time, the intervention strategy of each Member State is to be founded upon targets and related milestones, including also elements that show how the interventions will allow the targets to be reached. 24 And, with more specific reference to agri-environmental measures, it is expressly provided that ‘Member States may promote and support collective schemes and result-based payments schemes to encourage farmers or other beneficiaries to deliver a significant enhancement of the quality of the environment at a larger scale or in a measurable way’. 25 Likewise, the Agriculture (Wales) Act 2023 now foresees an agricultural regime operating firmly on the basis of indicators and targets, including the imposition of extensive monitoring and reporting obligations on Welsh Ministers. 26
The scope of the inquiry
In developing a results-based approach, much expertise has already been amassed in terms of the ecological, social and economic aspects of scheme design. 27 Moreover, research is seeing increasing focus on collaborative arrangements, 28 which are well calculated to deliver results at a landscape scale – and which form a central plank of the Landscape Recovery component of ELMS. That said, as has already been cogently identified by Moxey and White and by Saba, 29 the success of a results-based approach will also be dependent upon overcoming a range of governance challenges and the focus of this article will be on four legal issues. First, debate has long centred around how most effectively to design mechanisms to ‘set the bar’ for unlocking payment by results. Much constructive work has already been undertaken to develop indicators, but policymakers and legislators will also need to address such matters as the extent to which the baseline for results-based schemes should be firmly grounded in statute. Secondly, there is a significant hurdle to be cleared in determining the appropriate regulatory and/or contractual responses when there has been the failure to meet the mandated outcome (for example, if trees planted under a results-based agri-environmental scheme do not reach maturity by reason of drought or disease through no fault of the farmer or land manager). Thirdly, landlord and tenant considerations have the capacity materially to curtail participation in agri-environmental initiatives (and these considerations may be equally applicable whether payment is based upon results or upon prescribed actions). More specifically, difficult questions are engendered by: (a) the position of tenants who enjoy insufficient security of tenure to realise long-term objectives; and (b) clauses in tenancy agreements that restrict tenants to use of the land for ‘agriculture’ as traditionally understood. Fourthly, and finally, a longstanding source of legal controversy has been the compatibility of payments under results-based schemes with World Trade Organization (WTO) rules. In particular, there has been a doubt as to whether they may be exempt from domestic support reduction commitments by reason of Paragraph 12 of Annex 2 to the Agreement on Agriculture which covers ‘payments under environmental programmes’ – but subject to the proviso that they are ‘limited to the extra costs or loss of income involved in complying with the government programme’. There will be an opportunity here to discuss both the detailed implications of Paragraph 12 and also alternative exemptions which may be available.
Setting the bar for unlocking payment by results
Central to the implementation of any results-based scheme is the setting of the bar for unlocking payment, it being necessary to determine not only the targets to be achieved but also the floor to be exceeded. 30 As has been seen, the development of a set of robust indicators has been regarded as essential to this task, 31 with a broad range of initiatives already having been undertaken. Indeed, the CAP for the programming period 2014–2020 already incorporated a Common Monitoring and Evaluation Framework with increasing focus on result indicators – and the CAP Strategic Plans Regulation has ushered in a CAP ‘based on delivery of performance’, such a policy implying ‘annual and multi-annual assessment on the basis of selected outputs, result and impact indicators, as defined in the performance, monitoring and evaluation framework’. 32 At the national level also, attention has been devoted in England to setting results-based criteria. For example, under the 2019 Pilot Scheme significant strides forward were taken in developing results indicators for the four objectives (species rich hay meadow; habitat for breeding waders; provision of winter bird food; and provision of pollen and nectar resources for pollinators), although it was also recognised that the task was easier for some rather than for others. 33 Thus, in the case of hay meadows, it proved relatively straightforward to build upon existing practices to determine a ‘species richness score’ based on the presence of positive and negative indicator species. 34 By contrast, in the case of habitat for breeding waders, necessarily reliance was placed on proxy measurement, indirectly assessing positive and negative aspects of the ground habitat as opposed to direct counting of the birds themselves, since a range of external factors might affect the numbers of birds returning each year and only repeated observations throughout the season of birds within an individual field would provide reliable indication of breeding success. 35 Further progress has been made in Ireland. By way of illustration, the Burren Programme has operated a 10-point scoring system as the basis for environmental outcome-based payments made per eligible field, with no payment initially for scores less than 5, higher scores then granting entitlement to higher payment; and an interesting innovation is that pressure for improvement is applied by provision that, after two years of participation in the Programme, scores of 5 are no longer remunerated. 36
In terms of governance, as indicated, a primary consideration is the level at which to fix the floor for results-based schemes. Typically, targeted agri-environmental measures under Pillar II of the CAP have required that payment will only be made where the farmer exceeds a reference level of good agricultural practice which has often been cast in terms of the polluter pays principle. 37 Thus, for the purposes of the programming period commencing in 2014, the legislative floor was established by Article 28(3) of Regulation (EU) 1305/2013 of the European Parliament and of the Council, stipulating that agri-environment-climate payments should cover only those commitments which go beyond a broad range of regulatory measures, including notably the statutory management requirements and standards for good agricultural and environmental condition (GAECs) which are central to the cross-compliance regime. 38 In the future, there would seem to be a determined effort to maintain this approach, but at the same time to ‘raise the floor’ by heightening mandatory environmental standards. 39 To furnish one illustration, the cross-compliance regime now includes certain provisions of the Water Framework Directive and Sustainable Use of Pesticides Directive, 40 an objective which, significantly, had not proved attainable in the previous round of reform. 41 Indeed, as identified by Silvis, Jongeneel and Linderhof, any determination of the reference level is likely to be ‘difficult’, 42 since it has real consequences in terms of crystallising not only the extent of environmental ambition, but also the financial position of those in the farming industry, settling both the amount of penalties for those who fall below it and the amount of remuneration for those who exceed it. And an example of such consequences in practice may be provided by the decision of the Welsh Government to ‘raise the floor’ in respect of regulatory measures to address nitrate pollution. As of 1 April 2021, as a general rule, these have become applicable to all holdings in Wales as opposed to just those in specified nitrate-vulnerable zones, 43 it being affirmed that the new regime should fall within cross-compliance. 44 The financial implications flowing from this decision have been vocally articulated, 45 with there also having been a legal challenge to the legislation, which in the event proved unsuccessful. 46
In the case of ELMS, The Path to Sustainable Farming affirms with specific reference to the future regulatory regime that ‘[w]e want a clear distinction, and coherent relationship, between the basic requirements farmers are obliged to meet by law, and scheme standards where they are paid to go beyond this minimum’. 47 The precise lines of this distinction and relationship remain yet to be fully resolved, 48 with there also being express statement that the ‘regulatory baseline will continue to evolve over time’. 49 What can, however, be said with certainty is that in the early policy document, Health and Harmony, it was proposed to ‘maintain a strong regulatory baseline of standards that reflects the “polluter pays” principle’, with specific affirmation that this would ‘be the foundation of our future environmental land management system, setting out minimum standards that all farmers and land managers must comply with’. 50 At the inception of the process, therefore, the inference was that under ELMS farmers and land managers would only receive payment for ‘extra efforts’ over and above this baseline, but it would seem that there has subsequently been recognition of the governance – and economic – challenges which this might raise, of which three may be explored.
First, the fact that direct payments under Pillar I of the CAP were dependent upon farmers meeting a range of cross-compliance conditions provided a powerful lever to secure the observation of good agricultural practice: failure on their part to do so could lead, in the case of intentional non-compliance, to total exclusion from one or more aid schemes for one or more calendar years. 51 In England, however, such direct payments are to be phased out by the end of 2027 under Section 8 of the Agriculture Act 2020; and the decision has also been taken to end cross compliance even earlier, by the end of the 2023 scheme year, when direct payments are delinked from land. 52 Accordingly, there will be the removal of a valuable mechanism for enforcement, as highlighted in the 2020 Policy Discussion Document, which both acknowledged the effectiveness of GAECs and intimated that it might prove necessary to consider how to generate leverage for the purposes of securing less ambitious agri-environmental obligations. 53 In addition, and more generally, the reconfiguration of farm support is taking place against a policy background where there is emphasis on reducing reliance on rules-based regulation. 54
By contrast, there have already been concrete proposals in Wales to develop statutory ‘National Minimum Standards’ so as to ‘provide a clear regulatory baseline for all farmers in Wales’. 55 These would initially be founded upon the current legislation which underpins the cross-compliance regime and, in a process of clarification and consolidation, would bring the relevant agricultural regulations under the umbrella of one piece of legislation. 56 On the other hand, it was not proposed to carry over the current system of penalties under the Basic Payment Scheme. Instead, there would be a bespoke enforcement regime, subject to further consultation, its operation alongside the new outcomes-based support scheme remaining work in progress. Importantly, there was an expectation that continued compliance by farmers with the National Minimum Standards would be ‘essential’ if continued payment were to be received under that Scheme; and it was also stated that ‘[i]t will be important for farmers and land managers to understand how the proposed regulatory reform and the scheme fit together’. 57 Accordingly, clear intent is evident to create a robust statutory ‘floor’.
Secondly, if English and Welsh farmers and land managers are only paid for ‘extra efforts’ over and above the regulatory baseline, they may face considerable financial pressures. 58 EU farmers are to continue to benefit from a revised Basic Payment Scheme in the form of Basic Income Support for Sustainability, 59 with payment on an area basis being unlocked by observation of (albeit enhanced) cross-compliance conditions. As a result, the bulk of support is to be delivered by meeting a level of management which does not exceed good agricultural practice. At the same time, there is every indication that more than one of the devolved administrations will continue to provide some form of direct payment to cushion the income of farmers. For example, in Northern Ireland it is proposed that a Farm Sustainability Payment should be introduced, expressly characterised as a ‘basic safety net’, which would be area based. 60 Likewise, in Scotland it is envisaged that two of the four tiers of payment will ‘sit under the one umbrella of direct payments’ (a ‘Base Level Direct Payment’ and an Enhanced Level Direct Payment’), it being expressly stated that the former ‘could be viewed as an income support payment for farmers and crofters’. 61 Against this background, it is perhaps not surprising that the National Farmers Union has laid emphasis on the need for a system of English farm support that enables the agricultural community to run profitable businesses. 62
Thirdly, care is needed to ensure that, when setting the bar, the scheme does not operate to the disadvantage of farmers who have already attained high environmental standards, for example through earlier participation in an agri-environmental initiative. Concerns to this effect have already been expressed during the current trials; 63 and some additional thought would therefore seem necessary to develop ways of appropriately rewarding farmers who maintain land which is already in favourable condition. Not least, if the focus is on particular outcomes, there is logic in rewarding farmers for both their creation and their maintenance. Conversely, as observed by Burton and Schwarz, there should be no incentive for farmers deliberately to degrade the condition of their land just prior to entering a scheme so as to maximise payment. 64 And such concerns have now been formally recognised in the ‘payment principles’ which are to apply to ELMS: Thus, Principle 3 lays down that ‘[w]e want payments which recognise the value of existing natural assets and don’t unfairly disadvantage those who are already protecting and enhancing these assets to achieve good environmental and climate outcomes’, with there also being a determination to ‘avoid perverse incentives that inadvertently reward historic non-compliance or incentivise the degradation or removal of existing assets’. 65
These three challenges would appear to have contributed in England to a move away from the relatively tight focus on outcomes as originally found in Health and Harmony. Thus, when the three-tier design was first proposed for ELMS in February 2020, a continuing role for actions was evident in the case of Tier 1, looking to practices suitable for delivery at scale (such as using cover crops or planting wildflower margins). 66 A more purely results-based system was, nevertheless, still to prevail in the case of Tier 2, designed to support land managers in realising locally targeted environmental outcomes, while Tier 3 would be directed to landscape scale land-use change projects. 67 And this direction of travel away from outcomes has been maintained. Notably, when The Path to Sustainable Farming was issued in November 2020, replacing the earlier three tiers of ELMS with three components, respectively the Sustainable Farming Incentive, Local Nature Recovery and Landscape Recovery, 68 the express purpose of the Sustainable Farming Incentive was ‘to encourage the adoption of some simple actions that achieve more important environmental outcomes and provide a foundation for more advanced actions and improvements in the future’. 69 And, more recently, it has been re-affirmed that ‘[t]he actions in the [Sustainable Farming Incentive] are intended to be universal and straightforward for farmers to undertake in the course of their farming activities’. 70 The second component, Local Nature Recovery was also conceived in terms of payment for actions, in this instance to support local nature recovery and deliver local environmental priorities, although emphasis was also given to achieving outcomes in a local area. 71 Since December 2022, however, Local Nature Recovery is no longer to form a component of ELMS, its role being overtaken by an enhanced version of the pre-existing Countryside Stewardship Scheme. 72 This policy change is considered to have the advantage of preventing the need to introduce a whole new process. 73 Tighter focus on results-based schemes would, accordingly, now seem more confined to the third component, Landscape Recovery, directed to such projects as restoring wilder landscapes where appropriate, large-scale tree planting and peatland restoration. 74 Importantly, agreements will be awarded through competitive application rounds which are focused on outcomes, 75 but it may also be observed that the budget for these more ambitious Landscape Recovery projects is not projected to exceed £50 million over the 3-year period from 2022. 76
As indicated, this recasting of the ELMS has been widely understood to be a response to concerns over the income of farmers as direct payments are reduced and ultimately removed. Indeed, when the piloting of the Sustainable Farming Incentive was announced, DEFRA expressly confirmed that ‘[t]he scheme will give farmers an opportunity to secure a complementary income stream’. 77 And more recently the benefits of some of the actions to be undertaken under the Sustainable Farming Incentive have been articulated in terms of their financial, as opposed to environmental, benefits (such as generating income from unproductive corners and edges of fields). 78 Its introduction prompted criticism from environmental groups on the ground that it would amount to a return to paying farmers for basic activities which they should be undertaking in any event. 79 For example, it might be questioned how far good agricultural practice is exceeded by maintaining hedgerows. 80 That said, DEFRA has emphasised that even payment under the Sustainable Farming Incentive will be restricted to circumstances where the actions ‘go further than regulatory requirements’. 81
What can, therefore, be suggested with some certainty is that, since the issue of Health and Harmony, there has been a considerable shift in policy, providing a further manifestation of the longstanding tension between measures that are ‘broad and shallow’ and those which are ‘narrow and deep’. 82 The early focus on a post-Brexit regime which was directed to achieving outcomes as opposed to relying on prescribed actions offered considerable opportunities in terms of more precise targeting of support. 83 As indicated, the 2019 Pilot Scheme also identified the capacity of results-based schemes, inter alia, to increase ownership and understanding by farmers, so as to promote genuine behaviour change, while cost-effectiveness for the public purse could be enhanced by restricting payments to circumstances where the results were actually delivered. 84 Yet, a potential trade-off would be a reduced area covered by commitments. The way forward as foreseen by The Path to Sustainable Farming would appear to navigate a somewhat different course that embraces more fully the ‘broad and shallow’ as well as the ‘narrow and deep’. In particular, the Sustainable Farming Incentive presents a relatively low bar to be cleared in order to secure entitlement to payment, 85 together with a return to prescribed actions (as opposed to prescribed outcomes), the aim being for least 70% of farms to participate in some form of agri-environmental scheme by 2028. 86 Indeed, it continues to be emphasised that the Sustainable Farming Incentive should be accessible to all farmers. 87
Although couched in different languages, distinct similarities may thus be detected in the regimes proposed respectively for the EU and for England, both offering differing levels of ambition, with a gradation from mandatory obligations to voluntary commitments as the level of ambition raises. In particular, providing a bridge between earlier Pillar I and Pillar II payments, the reformed CAP has seen introduction within Pillar I of ‘eco-schemes’, expressly conceived as going beyond the mandatory requirements already prescribed by the system of conditionality in order to address, for example, enhanced management of permanent pastures and landscape features. 88 Implementation by Member States is mandatory, but participation by farmers is voluntary; 89 and it is understood that the measures will offer benefits in terms of targeting. 90 On the other hand, as has been seen, a notable difference between the EU and English regimes is that EU farmers will continue to receive direct payments for effectively meeting the baseline of good agricultural practice, the Impact Assessment which accompanied the issue of the proposed CAP Strategic Plans Regulation emphasising this policy choice to have the major advantage that ‘it ensures the engagement of all farmers’. 91 Accordingly, on the basis of this gradation, ‘broad and shallow’ measures would look to have a substantial role on both sides of the Channel, limiting the scope for operation of the ‘narrow and deep’ model which would seem the more natural home of results-based schemes.
Failure to meet the mandated outcomes
When payment is dependent upon meeting mandated outcomes, a question of high relevance is the appropriate way for the regulatory environment to respond when the farmer or land manager fails to do so. This question is of immediate practical consequence in that the risk of failure would seem to be a material factor in any decision by stakeholders whether or not to enter into results-based schemes. Definitely, the risk of non-delivery permeated the responses to the survey conducted for the purposes of the 2019 Pilot Scheme, the Final Report concluding that, ‘if a pure-results based approach is adopted for annual measures, such as those arable measures tested here, the perception of risk could be a significant barrier to initial uptake and needs to be considered in any scheme design’. 92 Like sentiments have been expressed by farmers participating in trials, the more so where payment is fully dependent upon results (although there is also some evidence that fears tend to abate with familiarity). 93 As has been frequently observed, the realisation of prescribed outcomes is not always within the control of farmers and land managers owing to a multitude of factors, prominent among them being adverse weather conditions and market volatility. 94 And the risks would seem to be greater where payment is dependent upon the presence of specific species, scrupulous habitat management of itself being insufficient to guarantee success. 95 Further, in the case of collaborative arrangements, farmers may prove reluctant to participate by reason that others may choose not to pull their weight (the ‘free-rider problem’), again leading potentially to failure over which there is no control. 96 That said, there are indications that both participation and compliance may be boosted if farmers engaging in collaborative arrangements are offered an agglomeration payment bonus, providing additional remuneration to reflect the collective contribution. 97
In terms of governance responses to this question, one option is that put forward by the Welsh Government. With respect to the proposed new support regime, it confirmed that it was prepared to bear the risk if agreed actions did not lead to outcomes, with there being explicit recognition that, even if farmers consistently undertook the appropriate actions, the intended outcome might not be realised for reasons beyond their control. 98 On the other hand, if the Welsh Government were effectively to act as an underwriter in this way, it was also thought appropriate that all payment should be conditional on the farmer having implemented the appropriate actions, 99 this approach meeting with the approval of the majority of the respondents to the Consultation. 100 Yet an ongoing concern is that a framework in this form would see a potential privileging of actions (together with their monitoring) as an integral part of the scheme design; and, from the perspective of the farmer, achieving the intended outcome might lessen in importance in comparison with ensuring compliance with the specified requirements for its realisation. 101 Accordingly, in their response to the Consultation, Natural Resources Wales suggested that instead consideration should be given to ‘a hybrid approach that provides assurance of basic management payment alongside a bonus for the attainment of measurable outcomes’. 102
The same issues were specifically explored in the context of the 2019 Pilot Scheme, which included a zero rate of payment in case of failure, so as to test attitudes towards risk associated with non-delivery. 103 Notably, there was felt to be mileage in designing a scheme with a range of payment tiers in order to reduce the financial risk which would flow from poor performance: 104 partial failure would at least generate partial payment. And the higher tiers might provide an incentive for outstanding performance. In the event, despite challenging weather conditions, none of the payment rates fell near zero. Nevertheless, concerns remained that perceptions of risk could reduce uptake, with particular reference to annual measures (as opposed to measures relating to an established habitat). It may also be mentioned that, for the arable element of the second year of the study (2018), there was exceptionally hot dry weather, which had an adverse effect on the winter bird food option that was being trialled, with the result that by mid-July farmers were contemplating the possibility of reseeding and further costly operations which might still not prevent failure, creating a real prospect of zero payment. After the researchers had discussed possible ways to address this with the European Commission, it was concluded that the fairest way forward would be to base payment for 2018 on the average performance levels over the two years of the scheme, so capturing higher performance during 2017. 105
In this context, what does seem tolerably clear is that the inclusion of force majeure provisions may prove a positive element in scheme design – and definitely they have already enjoyed a long history in the legislative arena for agriculture. 106 Indeed, their role is currently recognised in Regulation (EU) 2021/2116 of the European Parliament and of the Council, under which force majeure may preclude the imposition of administrative penalties in respect of conditionality, inter alia, where a severe natural disaster or severe meteorological event gravely affects the holding; and where an epizootic, a plant disease outbreak or the presence of a plant pest affects part or all of the beneficiary's livestock or crops – both circumstances of immediate relevance to agri-environmental schemes. 107 Likewise, at national level, since 2008 such practice has been adopted in the case of, for example, the English Woodland Grant Scheme, a prime instance of the need to invoke its operation being the adverse effects of ash dieback. 108 The future use of force majeure provisions in results-based agri-environmental agreements would not, therefore, amount to a great stretch legally.
Another option worthy of consideration might be private sector insurance, rather than Government effectively underwriting the scheme (as proposed in Wales). The development of novel market-led risk management tools featured prominently in early intimations of post-Brexit policy (including Health and Harmony), 109 while the use of insurance has long characterised United States agriculture, where its funding under the 2018 Farm Act is projected to exceed that on either commodities or conservation. 110 Similarly, risk management has for several years been rising up the agenda within the CAP. 111 On the other hand, insurance initiatives have not achieved great traction in the discourse which surrounded the passage of the Agriculture Bill 2019–21, 112 with there also being legitimate questions as to the appetite of the UK private insurance sector for agricultural risk in light of its earlier reservations over the insurance of genetically modified crops. 113
Accordingly, there do seem to be a variety of mechanisms that can be employed to assuage the concern of farmers that they may fail to meet the mandated outcomes (such concerns being the greater where such failure is through no fault of their own). In particular, growing consensus can be detected in favour of a major role for hybrid schemes where farmers are remunerated for actions, with additional remuneration then being provided for achieving mandated results. As has been seen, this approach is already being discussed in the context of the development of Welsh agricultural policy, with a similar direction of travel evident in German scheme design. 114 Hybrid schemes are also considered to have significant advantages for the more precise purpose of initiating and implementing result-based carbon farming mechanisms in the EU, the reduced element of risk being considered likely to foster uptake. 115 Moreover, the Burren Programme in Ireland serves as an illustration of the ‘hybrid’ model in practice, farmers being rewarded both for work undertaken and for environmental performance. 116 And wider research in Ireland has indicated that such an approach can be especially beneficial where substantial restorative actions are necessary to provide a platform for the achievement of the required results. 117 At the same time, however, it would seem wise to accept that the environmental effectiveness of the hybrid approach will be bought at the expense of greater complexity, not least it being necessary to put in place, and then monitor, specific frameworks for both the desired actions and the desired results. 118
Landlord and tenant
Landlord and tenant considerations may have a heightened negative impact on results-based schemes, 119 not least because there is considerable evidence that the likelihood of successful delivery of the mandated outcomes is increased by the presence of longer term commitments: in the words of Burton and Schwarz, ‘[i]ncreasing scheme and contract time-frames is … likely to strengthen the relationship between payments for outcomes and the outcomes themselves, boosting the efficacy of the scheme’, farmers becoming more confident that they will obtain a return on their investment in skills and machinery. 120 Yet the average length of new farm business tenancies in England and Wales during 2022 was 3.66 three years; and, even in the case of holdings with a house and buildings, the average was in the region of 10 years. 121 Accordingly, although the Government has confirmed that tenants with agreements protected under the Agricultural Holdings Act 1986 (AHA 1986) are to be considered as having sufficient security of tenure and management control to enter into multi-annual schemes, 122 many a tenant farmer may not enjoy an interest in land sufficient to realise the desired agri-environmental outcomes, with the scale of this issue to be judged from 2021 data revealing that, out of 6,133,000 hectares of land owned in England, 1,242,000 were let on farm business tenancies and 1,012,000 were seasonally rented in or let out. 123
Indeed, soon after the enactment of the Agriculture Act 2020, Baroness Rock highlighted in Parliamentary debate that the successful implementation of ELMS may prove problematic in light of an average length for new tenancies of under four years; 124 and Baroness McIntosh of Pickering sought assurance from the Minister that tenants, particularly those whose agreements were governed by the Agricultural Tenancies Act 1995 (ATA 1995), would ‘not be excluded from new government schemes replacing the CAP or indeed from any private arrangements for the better environmental management of the land’. 125 Similar sentiments have been echoed by the House of Commons Environment, Food and Rural Affairs Committee: For example, in its 2021 Report on Environmental Land Management and the Agricultural Transition, it advocated that ‘Defra also needs to ensure that Farm Business Tenancies, which tend to be short-term, are compatible with entering into ELM agreements’. 126 Away from Parliament, the National Food Strategy has identified the ‘particular challenges’ faced by tenants in delivering long-term changes; 127 and early results from tests and trials provided evidence that short-term tenancies may likewise act as a barrier to collaborative arrangements, since established farmers may be reluctant to participate in schemes with those enjoying less security of tenure in light of the hurdles which the latter may face in demonstrating environmental outcomes. 128 Further, and more recently, the Rock Review into the agricultural tenanted sector, issued in October 2022, found the paradox that, while ELMS is directed to lengthening the time horizon of agricultural policy, uncertainty in its implementation was causing landlords to grant short-term agreements pending greater clarity. 129
In response to such consistent and strongly expressed concerns, although several remain, 130 there has definitely been movement in Government policy, with the firm assertion of ‘the need to need to remove barriers to tenants entering all our ELM schemes, including [Landscape Recovery], so that they are as accessible as possible’. 131 By the time of the 2020 Policy Discussion Document it was already suggested that a balancing exercise might be required, observing that across the board ‘we may need to be flexible with the agreement length, ensuring it is long enough to secure the changes and outcomes we want, whilst short enough not to deter participation’. 132 And perhaps the greatest movement has been evident in the case of the Sustainable Farming Incentive, whose 3-year duration has had the capacity to prove problematic to farmers with tenancies on a ‘rolling’ year-by-year basis: current guidance now provides that it is sufficient for such farmers to expect to have ‘management control’ of the land for the 3-year duration, with it being possible for them to leave without penalty if management control is unexpectedly lost during that period. 133 In addition, the explicit consent of the landlord is not required for participation in the scheme, 134 but it should also be mentioned that, in its response to the detailed recommendations in the Rock Review, the Government confirmed that ‘it is the agreement holder's responsibility to check their tenancy agreement allows them to complete the actions in the standards they have selected’. 135 Further, Countryside Stewardship is rendered more accessible to tenants with a shorter duration of management control by allowing participation where the landlord countersigns the scheme agreement of the tenant so as to commit to delivery if the tenancy ends prior to its completion. 136 By contrast, in the case of Landscape Recovery, where projects are expected to last for over 20 years, 137 applicants have been required to demonstrate management control of the land, or the consent of those who enjoy such control, for the duration of the project development and implementation agreements. 138 And since, as has been seen, it is Landscape Recovery that has tightest focus on outcomes, issues relating to the duration of tenancy remain live in designing schemes where payment is by results. In this context, it may also be highlighted that tax law is being increasingly regarded as a potential lever for securing longer terms for tenancies: for example, a Government consultation and call for evidence issued in March 2023 inquired as to the impact of restricting 100% agricultural property relief under the Inheritance Tax regime to tenancies of at least 8 or more years. 139
Besides, tenant farmers may find that the provisions of their tenancy agreements do not sit naturally with schemes that have been designed to generate environmental outcomes as opposed to providing support for production agriculture as traditionally understood, with there also being high hurdles to accessing carbon and biodiversity markets. 140 Not least, there may be a potential breach of express covenants to use the land for ‘agriculture’, which in the case of both agricultural holdings under the AHA 1986 and farm business tenancies under the ATA 1995 remains defined in terms of production agriculture, without reference to the environment. 141 The immediacy of such a concern is evident in the fact that many respondents to the DEFRA 2019 consultation on agricultural tenancies specifically suggested that restrictive clauses could generate a barrier for AHA 1986 tenants following Brexit as new policies and schemes were introduced (although a few respondents did suggest that, if payments under future agricultural and environmental schemes were linked to longer-term agreements, this might prove an engine to drive the negotiation of longer terms). 142
Breach of express user covenants may be accompanied by further sanction flowing from the rules of good husbandry as set out in Section 11 of the Agriculture Act 1947, which extend to the maintenance of ‘a reasonable standard of efficient production’ and whose breach may give rise to service of a Case C notice to quit under the AHA 1986. In this context, attention may be directed to the 2017 case of Cruse v Snook, where the First-Tier Tribunal held that the tenant, which without the consent of the landlord had entered the land into an environmental stewardship scheme, was not farming in accordance with the rules of good husbandry, in the course of its decision placing particular reliance upon the fact that no crop was being produced. 143 Significantly, the First-Tier Tribunal also stated that ‘it is stretching the definitions too far to say that growing a mixture of grasses and flowers to attract pollinators’ amounted to efficient production, while the argument that the stewardship activities generated an income was likewise found not persuasive.
Even prior to the proposed introduction of ELMS, such issues had already long been articulated: for example, in the 2002 Curry Report it was recommended that DEFRA should, with relevant organisations, ‘revisit the definition of “agriculture” within tenancy legislation’, since ‘[a] broader definition for the purposes of legislation would be consistent with the multifunctional nature of farming we are moving towards’. 144 And similar sentiments continue to be expressed. Notably, the Rock Review recommended that ‘Defra should look at ways to update the definitions of agriculture and good husbandry to encompass actions for environmental benefit’, with it also being recommended that the services of the Law Commission should be engaged for this purpose. 145 In response, the Government confirmed that it foresaw such a role for the Law Commission, but subject to this being ‘appropriate and beneficial’. 146 Further, and more generally, it has been accepted by Government that under the current system, ‘legal definitions have undoubtedly restricted the evolution of more sustainable policy’. 147
The approach adopted under the Agriculture Act 2020 was nonetheless to leave the definition of ‘agriculture’ undisturbed in both the AHA 1986 and ATA 1995, instead providing a dispute procedure in the case of AHA 1986 tenancies to address instances when the landlord refuses a request for consent or a variation of the terms of the tenancy in circumstances where the tenant is looking to obtain ‘relevant financial assistance’ – which would include financial assistance under ELMS. 148 And detailed provisions have now been supplied by the Agricultural Holdings (Requests for Landlord's Consent or Variation of Terms and the Suitability Test) (England) Regulations 2021. 149 Such a regime was not initially considered necessary in the case of farm business tenancies under the ATA 1995, consultation finding, inter alia, that they were of shorter duration and therefore restrictive clauses were more regularly re-negotiated, 150 but the Government response to the Rock Review now holds out the prospect of further consideration of the farm business tenancy legislative framework so as to explore whether it too requires modernisation. 151 In Wales, adopting a somewhat different approach, Section 51 of the Agriculture (Wales) Act 2023 now provides a broader definition of ‘agriculture’, including also the maintenance of land in a state that makes it suitable for production (as opposed to in a state of production). And in Scotland there has been consultation whether to go further and amend the rules of good husbandry and good estate management, as defined in the Agricultural Holdings (Scotland) Act 1948, so that tenant farmers and their landlords are able to meet future global challenges, such as food production, biodiversity, and climate change crises. 152
Striking the right balance in this regard would not seem an easy task. On the one hand, if tenants are granted an unfettered ability to adopt environmental practices (extending, for example, to ‘rewilding’), then the confidence of landlords in the let sector might materially decline. 153 Further, the likelihood that some farmers may adopt a sharper shift away from production agriculture would seem to have increased following the recommendation in the National Food Strategy that rural land use should be based upon a three-compartment model, of which one compartment would comprise land ‘repurposed or adapted for environment projects’. 154 On the other hand, a requirement for the consent of the landlord to enter into schemes that are to provide the future bedrock of financial assistance to farming – and thereby farm profitability – would intuitively seem rather a high hurdle. 155 To provide context, UK total income from farming in 2022 was £7.9 billion, with subsidies during that year amounting to £3120 million. 156 The new mechanism to govern disputes where consent is withheld in the case of AHA 1986 tenancies constitutes a logical middle way, but instituting proceedings against a landlord is no light undertaking, in terms of not only the ongoing landlord-tenant relationship, but also administrative and cost implications. 157
One way forward which might be considered is to tilt the balance a little the other way, with the adoption of environmental practices under statutory financial assistance schemes being permitted unless the landlord has successfully initiated a dispute mechanism and substantiated reasons to the contrary. This would have greater capacity to meet the objectives of the Agriculture Act 2020, while at the same time protecting landlords from more egregious initiatives. And the reasons which could substantiate refusal of consent might legitimately be grounded in, inter alia, the change in the value or use of the land. Interestingly, in its response to the Rock Review, the Government expressly drew a distinction between scheme options that change the value or use of the land, where ‘landlords have a legitimate interest and should have the opportunity to consent’ and options that do not have such effect, where ‘tenants should be able to undertake and get paid for them without specific landlord consent’. 158 That said, the same document arguably sets the bar triggering ‘land-use change from agriculture’ rather low: for example, it extends to agroforestry, 159 which might reasonably be considered ‘use of land for woodlands where that use is ancillary to the farming of land for other agricultural purposes’. 160 By contrast, in the case of more widespread tree-planting and peatland restoration, non-agricultural use would be more certain. 161 A further matter which might arguably be included in the equation is any potential negative impact on rent for the landlord, not least in the case of AHA 1986 tenancies where the rent is to be determined by reference to, inter alia, productive capacity and related earning capacity. 162 Yet Trustees of J.W. Childers (Deceased) Will Trust v Anker establishes that income from management agreements restricting normal agricultural operations can be taken into account in the determination of rent as a ‘relevant factor’; 163 and, since future profitability of agricultural holdings may be very much dependent upon the resources which such agreements unlock, they may de facto come to bolster rather than diminish rents.
WTO compatibility
The single largest vehicle of support to EU farmers over recent years has been the Basic Payment Scheme (prior to its replacement by Basic Income Support for Sustainability), this being considered exempt from domestic support reduction commitments under the Agreement on Agriculture on the basis that its payments fall within the Green Box as ‘decoupled income support’. 164 To provide an illustration, for the 2019/2020 marketing year, the EU notified the WTO decoupled income support of 29,486.2 million Euros out of total Green Box support of 65,515.5 million Euros. 165 If there is to be a refocusing of financial assistance away from decoupled income support towards results-based agri-environmental schemes, a necessary consideration will be whether payments under those schemes are compatible with WTO rules – and this is not an area free from controversy.
In the agri-environmental context, the category of Green Box exemption that would most immediately spring to mind is that provided by Paragraph 12 of Annex 2 to the Agreement on Agriculture, namely ‘payments under environmental programmes’. Indeed, this is the category under which the UK has notified the Sustainable Farming Incentive.
166
The Paragraph stipulates as follows:
Eligibility for such payments shall be determined as part of a clearly defined government environmental or conservation programme and be dependent on the fulfilment of specific conditions under the government programme, including conditions related to production methods or inputs. The amount of payment shall be limited to the extra costs or loss of income involved in complying with the government programme.
167
Sub-paragraph (a) would appear apt to capture results-based schemes with its reference to payment being ‘dependent on the fulfilment of specific conditions under the government programme’, but the limitation imposed by sub-paragraph (b) may present a hurdle for both agri-environmental schemes generally and results-based schemes in particular. With respect to the latter, there is logic in the value of the outcomes determining the amount of payment, yet under sub-paragraph (b) reference is instead made to the extra costs or loss of income generated by their realisation, and it has been suggested that this may even prompt inefficiencies. 168
As a matter of economics, it has long been doubted if payment limited to the extra costs or loss of income is, in any event, able to give rise to a sufficient transfer of resources to farmers. In the words of Blandford and Josling, ‘[i]f the maximum offered to producers is an amount equivalent to additional costs or income foregone, what incentive (apart from altruism) is there for many producers to participate voluntarily in programs?’
169
And these concerns have persisted with direct reference to ELMS. For example, a headline finding within the context of ELMS tests and trials has been that: There is an emerging consensus that the income foregone plus costs incurred approach is not a strong financial incentive. Farmers are often not compensated sufficiently for activity undertaken, particularly where capital costs are incurred.
170
Recognition of this economic reality may be reflected in the fact that earlier EU legislation provided that support in respect of an agri-environmental commitment was to be calculated on the basis of not only income foregone and additional costs resulting from the commitment given, but also ‘the need to provide an incentive’. 172 But notably this need to provide an incentive was not included subsequently in either Council Regulation (EC) 1698/2005 or Regulation (EU) 1305/2013 of the European Parliament and of the Council (although both provided for payment of transaction costs), 173 with it being a reasonable assumption that such non-inclusion was guided by WTO considerations. 174 In the case of the originally proposed CAP Strategic Plans Regulation, there was similarly no mention of an incentive element, but again provision for the payment of transaction costs. 175 And, despite the European Parliament putting forward an amendment that Member States should also provide a ‘financial incentive’, 176 this did not find its way into the CAP Strategic Plans Regulation as enacted – although interestingly there was the inclusion of an express provision that payments should take into account the targets set. 177 On such basis, EU support for environmental, climate-related and other management commitments under the reformed regime is considered exempt within the Green Box under Paragraph 12 of Annex 2 to the Agreement on Agriculture. 178
Further, where payments are clearly made on the basis of loss of income, their effectiveness may be blunted by the reason that such a formula would favour farmers with the greatest income as opposed to those capable of providing the greatest environmental benefits; 179 as observed by Röder, ‘[t]o the non-economist's ear such a distribution model that follows “the ones who got (the high market revenues) will get (the high payments)” just seems unfair’. 180 By contrast, Bureau is of the view that, if voluntary schemes are to attract farmers with flourishing enterprises, then higher levels of payment may prove necessary. 181 In this context, Matthews has explored the possibility that payment might include ‘an opportunity cost’, compensating for the income opportunity lost through enrolment, which ‘would provide farmers with at least the same level of income as they might earn from “conventional” production’. 182 In the case of England, however, such an approach may lose some of its force by reason of the envisaged phasing out of direct payments by the end of 2027, a policy shift that is likely to see a reduction in the profitability of ‘conventional’ production. In any event, calculations of extra costs or loss of income are likely to give rise to complex economic questions not susceptible to easy answer, with the factors and data to be considered being both unspecified in the Agreement on Agriculture and, as yet, not reviewed in detail by the WTO Dispute Settlement Body. 183 Indeed, DEFRA has already highlighted instances where basing the level of payment on the direct costs of establishing an environmental public good does not reflect the true economic impact on the farmer (such as where the creation of woodland gives rise to permanent land use change), while other costs often not fully captured might include the loss of future value from alternative land uses which will thereafter be limited. 184
If payments under results-based schemes cannot secure exemption under Paragraph 12, other categories of exemption may still be available, of which three may be highlighted. 185 First, the Green Box also covers a range of general services under Paragraph 2, among which are included: research (with there being an express reference to ‘research in connection with environmental programmes’); training services; and extension and advisory services. Significantly, research and the provision of extension and advisory services are already well embedded in the CAP funding model, with Green Box exemption of respectively 1372.2 million Euros and 1173.2 million Euros being claimed for the 2019/2020 marketing year. 186 And, looking to the future, the CAP Strategic Plans Regulation foresees farm advisory services increasing awareness among farmers and other beneficiaries of CAP support of the relationship between farm and land management and, inter alia, environmental and climate standards, requirements and information. 187 In like vein, the provision of advice has already been identified as central to the successful operation of ELMS. 188 It may also be noted that general services under Paragraph 2 include infrastructural services (again there again being express reference to environmental programmes), although in this case there are material restrictions, such as that the expenditure is to be directed to the provision or construction of capital works only; and that the expenditure is, as a general rule, to exclude the subsidised provision of on-farm facilities.
Secondly, Paragraph 5 would seem to offer scope for WTO members to design Green Box-exempt direct payment schemes over and above those specifically listed in Paragraphs 6–13. 189 In consequence, a bespoke agri-environmental scheme might be introduced which escapes the limitation of payment to extra costs or loss of income (as imposed under Paragraph 12). That said, Paragraph 5 would require compliance with all but one of the criteria for exempt decoupled income support, including under Paragraph 6(e) the criterion that ‘[n]o production shall be required in order to receive such payments’. 190 This would immediately appear to present some difficulties for several forms of agri-environmental scheme, whether or not results-based: for example, it is not easy to see how the provision could be satisfied by either prescribed actions to plant grass seeds or an obligation to achieve the outcome of a herbal ley. 191 In addition, as with all forms of Green Box domestic support, it would be necessary for the bespoke schemes to comply with the ‘fundamental requirement’ under Paragraph 1 ‘that they have no, or at most minimal, trade-distorting effects or effects on production’ – and, as commented by Brink and Orden, many an environmental scheme may have effects on production, such as the environmentally motivated shift of land use from arable crops to pasture which gives rise to an increase in ruminant livestock production. 192
Thirdly, outside the Green Box, domestic support may be granted within the de minimis exemption, which could grant considerable policy leeway. By the virtue of Article 6:4(a) of the Agreement on Agriculture, in the case of developed countries, it extends to product-specific domestic support not exceeding 5% of a Member's total value of production of a basic agricultural product during the relevant year; and to non-product-specific domestic support not exceeding 5% of the value of a Member's total agricultural production. And, according to the calculations by Matthews (on the basis of figures over the period 2013–2015), the UK should enjoy de minimis exemption for each of product-specific and non-product-specific domestic support of £1155 million. 193 Taking into account also the widespread understanding that most UK domestic support already falls within the Green Box (and therefore does not eat into the de minimis exemption), 194 it becomes possible to suggest ‘that, overall, the UK would not find living with only de minimis subsidy limits too constraining’. 195 And this would now seem to be confirmed by the UK notifications to the WTO of domestic support commitments for the calendar years 2021 and 2022. 196
Furthermore, to the extent that payments under agri-environmental schemes are not exempt, both the EU and UK should still be able to provide domestic support to their farmers within their Amber Box limits. 197 For example, in respect of the marketing year 2019/2020, the EU Total Aggregate Measurement of Support commitment level was 72,378 million Euros, yet Amber Box domestic support for the year was only 5329.7 million Euros, leaving considerable ‘headroom’. 198 Since, however, the entitlement to grant domestic support has historically appeared in the name of the EU, without distinction between the Member States, Brexit has triggered the need to determine the extent to which such entitlement should be attributed to the UK, with it not being immediately clear as to the basis of this determination. 199 In the event, the UK notifications to the WTO of domestic support commitments for the calendar years 2021 and 2022 saw a Total Aggregate Measurement of Support commitment level of £4949.3 million, again providing considerable ‘headroom’. 200
Thus, although a considerable degree of uncertainty persists as to the detailed operation of WTO rules in the context of results-based agri-environmental schemes (and, agri-environmental schemes more generally), the hurdles to be cleared would not appear to be insuperable. So long as the payments are made under a clearly defined government environmental or conservation programme, and so long as they do not exceed the extra costs or loss of income, Paragraph 12 of Annex 2 to the AoA would seem to offer a route to WTO compatibility. At the same time, Paragraph 2 may permit the promotion of agri-environmental schemes through research, training services and extension and advisory services; and Paragraph 5 may provide opportunities to craft bespoke measures. To the extent that Green Box exemption cannot be secured under Annex 2, the de minimis exemption may assist; and, in so far as no exemption is available, leading to the payments falling within the Amber Box, it should be possible to continue current levels of non-exempt domestic support without breaching the ceiling of the Amber Box entitlement enjoyed by the UK. That said, WTO jurisprudence consistently reveals that what may seem to be minor regulatory tweaks can still lead to incompatibility, prompting the exercise of great care in scheme design. 201 For example, a regulatory push to provide an incentive element so as to boost participation might jeopardise compliance with the limitations imposed on the level of environmental payments under Paragraph 12 of Annex 2. And, if stipulated environmental outcomes (such as particular forms of cropping or livestock rearing) are closely linked with production, there is the potential for the measures to offend the ‘fundamental requirement’ of all Green Box exemptions that they should have no, or at most minimal, trade-distorting effects or effects on production. 202
Conclusion
The ecological, sociological and economic literature continues to reveal substantial advantages in results-based agri-environmental schemes. 203 Not least, there would seem to be clear opportunities to ‘raise the bar’ in terms of ecological ambition, more so if a gradated system is employed. In addition, there has long been evidence that results-based remuneration improves the motivation of farmers for environmental objectives, 204 while participation in such innovative schemes has the potential to enhance social capital, especially in the case of collaborative projects, provided that the time-frame is sufficient. 205 At a fundamental level, it is logical to make payment for what has actually been achieved rather than for prescribed actions irrespective of the outcome. Such logic also bolsters the justification of support from the public purse, with civil society showing a preference for result-oriented measures over action-oriented measures. 206 And, in this regard, it is notable that earlier findings have been substantially corroborated by the 2019 Pilot Scheme, it being concluded that: ‘[a] pure results-based approach provides an important motivation, and also a value-for-money safeguard to ensure payments are only made for performance above a defined minimum level’. 207 On the other hand, there has also been recognition that schemes focusing on outcomes generate ecological, social and economic challenges in terms of their implementation, of which three examples may be highlighted. 208 First, it has been no simple task to develop indicators, 209 although the 2019 Pilot Scheme saw the road open to their successful development in instances where the result measure was ‘direct’ (such as the presence of indicator species in a hay meadow). 210 Secondly, there is evidence that longer-term and more complex schemes necessary to realise more ambitious results may deter many production-oriented farmers from participating, not least in relation to tree planting. 211 Thirdly, a shift away from payment based upon actions to payment based upon results would intuitively imply an increase in transaction costs, although there is also some early evidence that results-based schemes are 'unlikely to be any less cost-effective'. 212 What is more certain is that transaction costs will tend to be enhanced where the project is collaborative (as under Landscape Recovery): 213 Indeed, the EU formally responded to this tendency by granting payment of transaction costs at a higher rate where commitments are undertaken by groups of farmers or groups of farmers and other land managers. 214 And, interestingly, even in the case of the action-based Sustainable Farming Incentive, it is now proposed by DEFRA to introduce, as from 2023, a management payment of up to £1000 per annum in recognition of the management costs and time involved for participating farmers. 215
As has been seen, difficulties of implementation extend also into the legal arena. Some of these may be broadly applicable across all agri-environmental schemes, but others have the capacity to resonate more strongly where the scheme is results-based; and four instances may be reiterated. First, ‘setting the bar’ to unlock payment is arguably more problematic when the measures are outcome-focused. Not least, as indicated, complex questions remain in the determination of results indicators, with particular reference to mobile species (for example, breeding waders), while differing policy trajectories may be detected in establishing the ‘floor’ which must be exceeded: notably, in the case of Wales, this ‘floor’ is to be firmly grounded in statutory National Minimum Standards, but such concrete proposals are not universal. Secondly, while the widespread employment of short-term tenancies may inhibit both participation in and the effectiveness of agri-environmental schemes more generally, their negative impact may the greater in the case of ambitious results-based projects, such as the Landscape Recovery component of ELMS, expressly characterised as ‘long-term’. 216 Thirdly, such results-based projects are also more likely to be constrained by express covenants to use the land for ‘agriculture’ or by the rules of good husbandry. Again the Landscape Recovery component of ELMS provides an illustration: anticipated projects include restoration of wilder landscapes in appropriate locations, large-scale tree planting and peatland restoration, 217 none of which would immediately come to mind as ‘agricultural’ within the terms of the AHA 1986 or ATA 1995 with their continued focus on production. Although the Agricultural Holdings (Requests for Landlord's Consent or Variation of Terms and the Suitability Test) (England) Regulations 2021 do provide an effective mechanism for a tenant to seek consent or variation of terms in order to unlock financial assistance for ELMS, there is a danger of the adoption of adversarial stances and the procedural requirements are considerable. It is, accordingly, understandable that the accompanying Code of Good Practice urges a conciliatory approach, which is also evident in the Government response to the Rock Review. 218 And there may be scope for a rebalancing of the consent and variation procedures so that the adoption of environmental practices by tenants under statutory financial assistance schemes is permitted unless the landlord has successfully initiated a dispute mechanism and substantiated reasons to the contrary, these reasons being based upon, inter alia, change in the value or use of the land. Fourthly, while the WTO rules may grant considerable latitude to provide domestic support under agri-environmental schemes, the limitation of the amount of environmental payments under Paragraph 12 of Annex 2 to the Agreement on Agriculture to extra costs or income foregone looks poorly calculated to accommodate schemes where remuneration is to take account of meeting targets, as now, for example, expressly envisaged under the reformed CAP. And the same wording of Paragraph 12 would not readily appear apt to exempt incentive elements under any form of agri-environmental scheme, notwithstanding their potential benefits in securing a transfer of resources to farmers. It may be advisable, therefore, to accept the financial strictures imposed by Paragraph 12 and, as necessary, seek to secure WTO compatibility of domestic support to farmers through either other categories of exempt Green Box domestic support, the de minimis exemption or maintaining any non-exempt support below Amber Box ceilings.
What would in any event seem clear is that legal considerations should be built into the design process of results-based agri-environmental schemes. They are critical to their alignment with not only domestic legislation (such as any regulatory framework which constitutes the baseline of good agricultural practice), but also international obligations (such as WTO rules and, in all likelihood, increasing climate change commitments). Further, they have the capacity to impact positively on scheme effectiveness, with contractual provisions being capable of providing solutions as opposed to just problems. For example, force majeure clauses may encourage participation by farmers legitimately concerned that they may fail to meet targets through factors outside their control, while longer-term tenancies with greater flexibility as to permitted land use may likewise promote both uptake and the realisation of more ambitious goals. In this enterprise, however, there may be merit in recognising that the delivery of sophisticated environmental objectives will necessarily involve a degree of complexity in terms of scheme design (including the legal dimension), especially where a collective approach is adopted. 219 In consequence, there may be wisdom in dialling down some of the clarion calls for simplicity within both the EU and the UK, these being liable to raise expectations that may prove difficult to fulfil. 220 And it is notable that, more recently, the Secretary of State for Environment has urged that it is necessary to ‘embrace the complexity’. 221
Indeed, emphasis could rather be given to the positive role that regulation and contract might play in securing the success of results-based schemes, whether alleviating the apprehensions of risk-averse farmers, providing tenants with the opportunity to participate or even securing WTO compatibility. Indeed, there are now proposals and even concrete steps to revisit narrow definitions of both ‘agriculture’ and the rules of good husbandry with a view to facilitating ‘narrow and deep’ schemes, such as Landscape Recovery. And there is also focus on creating an Inheritance Tax regime which can foster environmental land management. At the same time, it must be recognised that results-based schemes are likely to feature as but one ingredient within a broader policy mix. In particular, the action-based Sustainable Farming Incentive has been introduced to generate greater uptake and arguably also provide a transfer of resources to farmers; and this marks a significant departure from the earlier focus on outcomes as advocated in Health and Harmony. Moreover, it is currently envisaged that Landscape Recovery will restore only 300,000 hectares of wildlife habitat by 2042 - a target described as ‘very unambitious’ by Dr Julia Aglionby, the Chair of the Uplands Alliance (constituting less than 3 per cent of the landmass of England). 222 Faced by these potentially conflicting policy objectives, serious further consideration might therefore be given to greater use of hybrid schemes, which have the capacity to offer significant levels of participation, attracted by guaranteed payments for actions, together with enhanced environmental dividends through the prospect of additional payments for meeting higher targets. 223 Importantly, this encourages farmers and land managers to engage on the farm in activities which are both ‘broad and shallow’ and ‘narrow and deep’, with a legislative framework which breaks away from the dichotomy between production on the one hand and the environment on the other.
Footnotes
Acknowledgement
Grateful thanks are extended to the following whose guidance and comments during the writing of this article have been very much appreciated: Richard Bedford, Pippa Chapman, Emma Cowan, Theresa Eichhorn, Duncan Fyfe, Joseph Holden, Jo Hawkins, Mike Holland, William Kunin, Alexandra Langlais-Hesse, Nerys Llewellyn-Jones, Julia Martin-Ortega, Joseph McMahon, Ludivine Petetin, Tania Runge, Lena Schaller, Fiona Smith, Emmanouil Tyllianakis, Davide Viaggi, Peter Williams, Rhys Woodfin, Guy Ziv and the anonymous reviewers.
Declaration of conflicting interests
The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.
Funding
The author(s) disclosed receipt of the following financial support for the research, authorship, and/or publication of this article: This work was supported by the European Commission and by the Department for Environment, Food and Rural Affairs, (respectively, Grant Number H2020-GA 817949 (CONSOLE) and Test and Trial No 352).
