Pausing the Sustainable Farming Incentive: What happens to farmers and sustainable food production in the UK?

This article was originally published on the Global Food & Environment Institute blog on 15 March 2025.

The government has recently announced changes to the Sustainable Farming Incentive (SFI). This scheme will now be paused to new applications, meaning farmers without an existing SFI agreement will now not be eligible to apply.

The Sustainable Farming Incentive was a government-led scheme as part of a wider Environmental Land Management scheme, which offered farmers money in exchange for their commitment to sustainable farming and land management practices. The purpose of the scheme was to support sustainable food production practices in England whilst protecting nature.

The new Labour government has introduced several controversial changes to agricultural policy, many of which have been met with resistance from farmers. These include proposed adjustments to inheritance tax and, more recently, the abrupt closure of new applications to the SFI — one of the few post-Brexit funding options available to farmers.

Farmers in England are already grappling with significant reductions in direct payments as the Basic Payment Scheme is phased out. By 2024, payments had already been halved, and in 2025, they are subject to further steep cuts under the new system of delinked payments. These payments, calculated based on historic Basic Payment Scheme averages from 2020–2022, will continue to shrink each year until they are completely phased out by 2027. Some farmers are seeing reductions of up to 76% on the first £30,000 of their previous payments, and 100% on anything above this threshold.

This shift is particularly concerning because subsidies have long been a crucial pillar of farm income. Many agricultural businesses have historically operated at a net loss, with some receiving up to 90% of their farm business income from subsidy payments. With this financial support vanishing, farmers are being forced to rethink their business models.

To adapt, many are exploring a mix of strategies, including intensifying production, acquiring more land, diversifying their businesses, or joining environmental schemes. However, this comes with risks. Expanding livestock numbers (i.e., over grazing and intensification), for example, could have unintended consequences, such as soil degradation and environmental damage — ironically undermining the very goals the government claims to support.

The Environmental Land Management Schemes were designed to replace Basic Payment Scheme with £2.4 billion annually in funding, encouraging farmers to provide environmental benefits under the principle of “public money for public goods.” DEFRA had aimed for 70% of farmers to be enrolled in the SFI by 2028, and with 37,000 agreements in place, uptake was growing. However, with over 100,000 farm holdings in England, many farmers were still undecided or struggling to access the scheme when applications were suddenly closed in March 2025.

The closure at this stage is clearly motivated by a lack of funding, as DEFRA has announced that further details about the reformed SFI offer will follow the Spending Review.

The shock factor is not just the closure itself, but the way it was done — without warning, consultation, or any clear alternative for those who were relying on it. At a time when farmer confidence is already at record lows, this has only added to the sense of instability.

From a legal point of view, such abrupt interruption may also be deemed a violation of a legitimate expectation — at least for those farmers already involved in the application process. This is the idea that if an agency adopts a policy, it should be required to follow and apply that policy. If it does not follow it, then Courts can protect citizens from the change of policy. Obviously, government and agencies are allowed to change policies as they are connected to the political agenda of the winning party, that has won the right to do so. However, such changes in policies should be gradual to allow citizens that had an expectation of support, to adjust their expectations to a new policy.

The protection of substantial legitimate expectation rather than procedural expectation is controversial. However, in this case, DEFRA had promised to give applicants at least six months’ notice of changes affecting the applications, a promise that has been clearly breached. The concept of violation of legitimate expectation connects with the idea of fairness: indeed, the general response to the interruption of the SFI is that is unfair for the lack of forewarning.

Another challenge is accessibility. While Environmental Land Management Schemes were never intended as direct replacements for Basic Payment Scheme, many farmers saw them as a way to offset lost income. Yet a significant proportion of farmers, particularly those over 65 or with limited digital literacy, struggle to navigate the complex application process. Some still operate without computers or smartphones, making it nearly impossible to interpret 170-page policy documents detailing the conditions of these schemes.

More broadly, the SFI closure highlights a bigger issue: the fundamental uncertainty surrounding the future of agricultural funding. The government has committed to £2.4 billion annually for Environmental Land Management Schemes, but as this latest decision proves, policy can change overnight. Farm businesses require long-term stability, yet many farmers now find themselves reliant on funding streams that could be withdrawn with little notice.

This raises a crucial question: would many farms still be viable without existing subsidies? And if, for example, the UK meets its Net Zero targets, will further funding be cut entirely? How would farmers cope? What would the implications be to other stakeholders i.e., the public? These are questions that must be grappled with as we navigate an increasingly unpredictable and volatile policy landscape.