A Sector Under Pressure: Sustainable Farming Incentive
Iran’s blockade of the Strait of Hormuz has plunged the British farming industry into deep financial uncertainty, driving sharp increases in the cost of fuel and fertiliser. Red diesel prices have soared by 60%, while nitrogen fertiliser is now approximately £50 more expensive per tonne compared with 2025. For farmers already operating on narrow margins, increased pressure on production has exacerbated concerns over profitability and long-term resilience.
Against this backdrop, the Department for Environment, Food & Rural Affairs (DEFRA) has unveiled a new Sustainable Farming Incentive (SFI26): a £240 million scheme designed to support family farms, strengthen resilience, and help industry stakeholders meet the demands of modern agriculture. The funding package also includes an additional £50 million for new Countryside Stewardship Higher Tier (CSHT) agreements, available from this year to support targeted environmental improvements where they will have the greatest impact.
This announcement represents one of the Labour Government’s more significant interventions in rural policy since taking office, but questions remain over whether the funding package will be sufficient to achieve its ambitious environmental goals.
Public Money for Public Goods: Sustainable Farming Incentive
The scheme forms part of the government’s wider Environmental Land Management (ELM) framework, which is centred around the principle of “public money for public goods”. Under this approach, farmers receive financial support in exchange for adopting practices that deliver environmental benefits. These include improving biodiversity, protecting wildlife habitats, enhancing water quality, reducing soil degradation, and helping communities become more resilient to environmental hazards such as flooding and drought.
According to Environment Secretary Emma Reynolds, SFI26 seeks to address the inadequacies of the previous Sustainable Farming Incentive, which was suspended in 2025 after reaching its funding cap. Ministers argue that the earlier scheme disproportionately benefited larger landowners; Reynolds claims that “a quarter of funding went to just four percent of farms”.
The revised programme is intended to be simpler, fairer, and more accessible, particularly for smaller and family-run farms which often struggle with administrative requirements. Announcing the package, Reynolds explained, “We redesigned it to be simpler and fairer, helping more farms grow, boost productivity and protect the natural environment they depend on”.
A Gap Between Funding and Ambition?
However, this announcement has already been met with concerns that the package will not stretch far enough. The National Farmers’ Union (NFU) has welcomed efforts to simplify and broaden access to environmental funding but argues that government ambition is not being matched by investment.
Vice-President Robyn Munt is reportedly “incredibly frustrated” and has warned that “the budget won’t stretch far enough to support those already delivering for nature to move into SFI26”. For the NFU, the issue is not simply how funding is distributed, but whether it will enable farmers to deliver on the government’s own environmental and food-security objectives.
These concerns are heightened by an already strained relationship between the British farming community and the Labour administration. Rachel Reeves’ 2024 budget proved unpopular among farmers, particularly the proposed reforms to Agricultural Property Relief which limit inheritance tax exemptions on family farms. Celebrity farm owner, Jeremy Clarkson, has been particularly vocal in his criticism of Government measures, condemning the Chancellor of the Exchequer’s plan as “actively anti-farming”.
In the latest episode of Clarkson’s Farm, he also expressed frustration over the bureaucracy associated with accessing the revised CSHT grants, clashing with farm manager Charlie Ireland over specifications required for a government-funded ‘small leaky woody dam’ project. His objections highlight a tension at the heart of Labour’s reforms: whether the government can simplify access to environmental funding while maintaining the standards required to deliver meaningful environmental outcomes.
It is clear that the Government has set out an ambitious, legally binding vision for sustainable agriculture, but whether SFI26 can successfully cut the red tape, deliver meaningful environmental gains, and rebuild farmers’ trust, remains to be seen.
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