the impact of esas on lowland farming

Land Use Policy 1994 I I (2) 107-l 1X

The impact of ESAs on lowland farming

Julie Froud

This paper focuses on the impact of the first and second round of ESAs on lowland farms in the UK, and looks in detail at a number of socioeconomic issues. Although farm incomes are generally enhanced, the impact upon farming practices and agricultural production is fairly limited except where arable land is converted to grass. The paper then considers the role of ESAs within the general context of agricultural policy reforms, concluding that they are likely to remain important but that close attention is required to ensure that payments and prescriptions are kept in line with the general economic environment.

The author is a Research Associate at the Department of Accounting and Finance, University of Manchester, Manchester, Ml3 9PL, UK.

‘For a fuller description of the history and context of the ESAs, see D. Baldock, G. Cox, P. Lowe and M. Winter, ‘Environmen- tally sensitive areas: incrementalism or re- form?‘, Journal of Rural Studies, Vol 6, 1990, pp 143162; and D. Colman, B. Crabtree, J. Froud and L. O’Carroll, Com- pafaative Effectiveness of Conservation Mechanisms, Department of Agricultural Economics, University of Manchester, UK, 1992. ‘MAFF Press Notice, 12/l l/92. ‘There will be more concentration on the Suffolk River Valleys due to the author’s involvement in the socioeconomic monitoring of this ESA. See N. Russell and J. Froud, The Socio-economic Monitoring of the North Peak and Suffolk River Valleys Environmentally Sensitive Area Schemes, Department of Agricultural Economics, University of Manchester, UK, 1991. 4MAFF, Reports of Monitoring in the Broads, Somerset Levels and Moors and South Downs, London, 1991; and MAFF, Draft Reports of Monitoring in the Suffolk River Valleys, Breckland and Test Valley, MAFF, London, 1992.

The Environmentally Sensitive Areas (ESAs) policy was initiated in the UK in response to continued pressures on threatened landscapes and their associated farming practices and an absence of existing suitable measures to protect them. The Broads Grazing Marshes Conservation Scheme experiment provided the prototype with its principle of flat-rate payments in return for compliance with a set of management prescriptions. EC Directive 797/85, Article 19, empowered member states to aid farming in ‘environmentally sensitive areas’ and the UK government soon responded in the 1986 Agriculture Act which contained the legislation allowing for the subsequent development of the ESA programme. ’

The significance of the ESAs lies in the fact that they represent the first attempt by the Ministry of Agriculture to explicitly include environmental objectives into an agricultural policy, although they do have the secondary objective of, where possible, reducing surplus food production. Since their introduction in 1987 there have been several extensions of the policy, increasing the designated area to 0.8 million ha by 1991

and, following the implementation of the third tranche, to a projected 2.2 million ha in 1993 (representing approximately 13% of the UK agricultural area). The introduction of lO-year schemes rather than the initial five-year ones implies that ESAs will occupy more than a transitory place in the development of agricultural policies. The size of the budget for the English ESAs is expected to rise from fll million in 1992 to f43 million by 1995/96.’

This paper focuses on the first six lowland ESAs of England: the Broads, Somerset Levels and Moors and the South Downs, which were designated in 1987, and the Suffolk River Valleys, Breckland and the Test Valley, implemented as part of the second round in 1988.’ All of these have now been revised at the end of their five-year lifetime and relaunched as lo-year schemes. The effects of these original schemes on farming practices and incomes will be considered as well as the way the policies have already evolved and are likely to continue to evolve in the future, given concurrent changes in the agricultural policy arena. Environmental and socioeconomic monitoring work was carried out in the early stages of the first and second round; this paper draws on the results of that work.4

Characteristics of the lowland ESAs

All the lowland ESAs have the central feature of maintaining and to

0264-8377/94/020107-l 2 0 1994 Butterworth-Heinemann Ltd 107

Table 1. Summary of characteristics of the English lowland ESAs.

ESA

The Broads

Year Eligible Target Actual designated area (ha) uptake (ha) uptake (ha)

1987 20 578 11750 12 306

Somerset Levels and Moors South Downs

Breckland

1987 25 750 13 800

1987188’ 47 950 11 725

1988 46 177 4 295

Suffolk Rover Valleys

1988 21 900 7 675 7 341

Test Valley 1988 1413 1 060 383

9 312

7 838

3 898

Summary of scheme components

T,er 1 (f 125iha) maintenance of Broads landscape and grassland T(er 2 (f200iha) enhancement of existing grassland Trer 1 (f82iha) maintenance of grassland including management of water levels Tier 2 (fl20/ha) enhancement of grassland Tier 1 (f35iha) marntenance of chalk grassland Tier 2 (f 160iha) conversron of arable to grass Tier 1 (f loo/ha) management of heath and dry grass rncludrng reversion T/er 2 (f 125iha) management of wet grassland tncludrng reversion T/er 3 (f300/ha) creation of arable field margrns Tfer 1 (f70/ha) maintenance of traditional grassland Tier 2 (f 180iha) management of wet grassland Tter 3 (f200/ha) arable reversion f8Oiha protection of existing untmproved grassland and enhancement of more Improved grass

a The South Downs ESA was extended rn 1988

5The criteria set by MAFF for designation of an ESA were that it should be an area: (1) of national environmental significance; (2) whose conservation depends on the adoption, maintenance or extension of a particular form of farming practice; (3) in which there have occurred, or there is a likelihood of, changes in farming practices which pose a major threat to the environment; (4) which would permit the econo- mical administration of appropriate conservation aids; and (5) which represent a discrete and coherent area of environmental interest (MAFF, Environmentally Sensi- tive Areas: a Consultation Paper, MAFF, London, 1985). ?n some cases there may be an elrgrbrlrty criterion for Tier 2, ie it must be of some existing ecological value. For instance, in the Suffolk River Valleys the ‘ecologically more interesting land’ (MAFF, ESA Scheme Guidelines, 1988), is suitable for inclusion in Tier 2. This is the closest that the ESAs come to the targeting of payments in the initial schemes. Since fman- cial constraints have not proved binding there has been no need to give preference to certain applications, for instance, those which may create a coherent block of agreement land.

some extent reintroducing traditional extensive livestock grazing systems in areas of England where, with the exception of the Somerset Levels and Moors, arable cropping predominates. In addition, in each of these areas there was or is some perceived threat to the remaining grassland. in the form of drainage or other agricultural improvement, or, in some cases, under-grazing. Conversion to arable usage or threats from recreational uses were also seen to be significant risk factors.5 Most of these ESAs lie in the southeast area of England and represent fragments of unimproved or semi-improved grassland along river valleys, or larger blocks of inherently wet grazing land. In addition, Breckland is characterized by heath and dry grassland, another rare and threatened lowland habitat.

Table 1 summarizes some of the characteristics of these six areas, including the eligible area (excluding non-agricultural land, woods, open water and in some cases arable land), expected and actual uptake, and a brief guide to the components or tiers involved in the individual schemes. These ESAs range from the South Downs and Breckland with almost 50 000 ha each down to the Test Valley with less than 1500 ha eligible. In all cases targets for uptake were set at 75% of the eligible area. These have been exceeded in some components of the ESAs and not met in others.

In most of the schemes participants enter into a contract for the management of their land according to the prescriptions and payments set down in a number of tiers of options. The Test Valley is the exception where there is only one tier. Generally, the lowest tier, Tier 1, involves the maintenance of a traditional grassland landscape with restrictions on fertilizer and herbicide use, field cultivations and drainage and in some cases stocking rates and hay/silage cutting dates. Tier 2 components command higher payments in return for some enhancement of the grassland habitat, including tighter restrictions on farming operations and maintenance of minimum water levels in open field drainage systems.’ Also included in either a second or third tier in some ESAs is an arable reversion option (Tier 2 in the South Downs: Tier 3 in the Suffolk River Valleys), designed to reintroduce grassland in areas which historically would have been grazed. The Breckland ESA is slightly more complicated in that Tiers 1 and 2 allow for heath and dry

LAND USE POLICY April 1994

Impacr of ESAs on lowland farming

Table 2. Characteristics of the participating farms.

a Estimate

ESA

The Broads


Breckland

Suffolk River Valleys

Test Valley

Average holding size (ha)

176

64

266

376

150

N/A

Average area in ESA agreement per holding (ha)

36

21

59

45

24

14a

Main farm types (% of holding)

General cropplng - 57% Lowland cropping, cattle and sheep - 13% Specialist cereals - 11% Specialist and mainly dairy - 31% Lowland cattle and sheep - 31% Holdings without livestock - 25% General cropping - 47% Specialist cereals - 23% Lowland cropprng, cattle and sheep - 16% General cropping - 74% Specialist pigs, poultry or mrxed - 10% Lowland cropping, cattle and sheep - 53% Lowland cattle and sheep - 14% Specialist cereals - 14% Specialist cereals and general cropprng - 64% Mainly dairy - 16%

grassland reversion and wet grassland reversion respectively. In this instance, Tier 3 provides for the creation of uncropped arable field margins and wildlife strips.

Payments vary between tiers and areas. They are determined on the basis of the restrictiveness of the guidelines and hence the extent of extra costs incurred and/or output forgone and will reflect to some extent the other opportunities available on such land. There have been no formal profit forgone calculations, unlike with Management Agrec- ments, and hence the setting of a flat-rate payment implies that some participants will be over-compensated and others under-compensated in respect of any impact on their farming incomes. Payments for land reversion are the highest (up to 5300 per hectare per annum), while compliance with the less demanding maintenance options requires less in terms of compensation.

In some areas, such as the Suffolk River Valleys, participants must enter all of their eligible grassland; in others, farmers can enter as much or as little as they like. The latter option may lead to a more fragmented approach although it may be more likely to encourage a greater number of participants. There are no restrictions on the minimum size of the farms that can be entered, which means that part-time, semi-retired and non-farmers, for instance those who let out their land, are eligible to join. In the Suffolk River Valleys scheme land can be used for grazing horses and so to this extent the ESA has moved away from being solely an agricultural scheme.

There is considerable variation between the types of farms participating in the various ESA schemes, as shown in Table 2. For instance, the Somerset Levels and Moors is comprised mainly of small dairy farms with, on average, approximately one-third of the holding under agreement. In Breckland, in contrast, holdings are large, mostly arable. with only 12% subject to an ESA agreement. With the exception of the Somerset Levels and Moors, however, most of the farms involved arc mainly arable. In all scheme areas at least one-fifth of participating holdings were classed as ‘part-time’ in terms of BSU; in the Somerset levels 68% of holdings fell into this category.

The effects of the lowland ESAs

The effect of each ESA in terms of both the farm business and its end

LAND USE POLICY April 1994 109

Impuc~ of ESAs on lowland farming

Table 3. Summary of lowland ESA guidelinesa

ESA

The Broads

Fertilizer usage

Tl < 125 kg/ha/pa NPK 72 < 44 kg/ha/pa N (0 PK)

Somerset Levels and Moors

Tl < 75 kg/ha/pa NPK 72 < 25 kg/ha/pa NPK

South Downs Tl no organic or lnorganlc fertilizers

Breckland

72 no fertilizers following sward establishment 71 no organic or inorganic fertilizers


Test Valley

72 < 45 kg/ha/pa N (no P or K) UWSb no organrc or inorganic fertilizers Tl do not increase existing rates 72 no inorganic fertilizers 73 no more than 125 kg/ha N following sward establishment No organic fertilizers and 12.5 t/ha FYM

Grass cutting dates Stocking rates

T1 i 3.7 lu/ha 31/3 to l/l0

Grazing restrictions

T2 not before 1617

T2 no grazing 31/10 to l/4

Tl no toppklg after 31/E 72 no mowing before 117 Tl no cutkng or topping before 1616

Tl average rate of 1.25 lu/ha

T7 < 1.0 lu/ha

[Cattle and sheep only] T2 no sheep 31110 to i/3 Graze with cattle and sheep only

72 no cutkng J7 no prgs or before II7 poultry

72 no cutting before 1617

No topping or mowing before 16/6

72 no grazing i/4 to 1% on wet grassland

Graze with cattle and sheep between 0.7 and 1.5 lu/ha 30/4 to l/9

Cultivation restrictions

T2 no cultivation 3113 to 1617 T2 no cultrvations 3113 to 117

T2 no cultivations 31/3 to l/7

T2 no cultivations 114 to 1517

No cultivations 31/3 to 1616

a This table does not include a comprehensrve list of management prescnptions. All schemes have certain other gurdelines in common, including restricted use of herbicides and lime; protection of landscape, historic and other features; and prohibition of drainage and other works b Uncropped Wildlife Strips

‘Much is still unknown, however, about how reductions in fertilizer and herbicide use as well as changes in grazing practices will affect species diversity and rich- ness and the likely time path of such changes. In addition, it is not clear to what extent previous environmental deterioration will prove irreversible. Nevertheless, at least in the short run, these may be the best indicators of likely environmental impact since, as is discussed later, in the period so far elapsed many environmental effects have not been conclusively demon- strated.

110

goal, the environment, will be influenced by changes in farming practices. Moderation of the use of certain inputs and in the extent and timing of operations will have an impact on outputs and incomes but also upon species composition in grassland, water quality, numbers of nesting birds and other environmental indicators.’ The following sec- tions consider some of the socioeconomic effects of the first and second round lowland ESAs and then turn to the role of the ESA programme within the future agricultural policy portfolio.

Impact on farming practices

The impact on farming practices will depend upon two factors: the guidelines laid down in the ESA contract and the intensity of management prevailing at the time of joining. Table 3 summarizes some of the main management prescriptions in the grassland components of these lowland ESAs. It can be seen that there is a great deal of similarity between areas in the type of grassland management which is being encouraged. Tier 1 was designed to be acceptable on a wide basis and in many cases participation in this tier did not lead to any significant differences in farming practice. Tier 1 could be considered as an incentive for farmers to put land into the higher, more restrictive tiers which produce more in the way of landscape and wildlife benefits.

Often farmers have only entered the land which is least intensively used, ie the small, wet, inaccessible fields. More intensively used land, for instance that used for dairying, has not been entered, and therefore the overall impact on farming practices and hence the environment on participant farms is minimized. Cutting dates have proved to be a binding constraint on some land and weed control was cited by many in all of the lowland ESAs as a factor which caused difficulties. In the Suffolk River Valleys, approximately one-third of those intcrvicwcd had had to make major changes to their methods of weed control in both Tiers 1 and 2, with the prohibition of all but very site-specific

LAND USE POLICY April 1994

Impact of ESAs on lowland furming

Table 4. The impact of ESA guidelines on average fertilizer usage.

ESA

The Broads


Breckland


Test Valley

Tier 7‘

Tier 2

Tier 7

fier 2

Tier 1 Tier 2 Tier 1 Tier 2 Tier 1 Tier 2 Tier 3

Pre-ESA usage (kg/ha)

Post-ESA usage (kg/ha)

156 100 69 35 60 42 14 10 14 0

165 0 4 0

52 20 52 44 10 0 72 44 41 0

methods of control. On Tier 1 land only 20% of those questioned had reduced fertilizer usage, 16% lowered their stocking rates and 22% changed the extent of their grassland conservation. On Tier 2 grassland changes in farming practice were predictably more extensive: 73(X,, 42% and 50% respectively for the same three categories. As seen below, even where changes have taken place these have, at least initially, been on a fairy small scale.

Chunges in production intensity. Two indicators of production intensity can be examined: inorganic fertilizer application and stocking levels. Each of these ESAs seeks first of all to prevent existing levels of fertilizer application from rising. In addition, maximum rates may be set, both per year and per application. and in some cases (for instance the South Downs Tier 1 and the Test) no inorganic fertilizer is permitted. The extent to which these have actually reduced fertilizer use is illustrated in Table 4. In some cases even though the average existing pre-ESA application rates were less than those set in the guidelines, there have still been overall reductions. This has occurred in the

‘It should be noted that no adjustment has Somerset Levels and Moors and in Tier 1 of the Suffolk River Valleys

been made for the extent to which fertilizer where in this case the prescription only stipulated that existing usage use may have been reduced over this should not be increased.x period in the absence of the policy. This ‘policy-off’ effect is difficult to deduce using

There are stocking rate restrictions in all of the lowland ESAs except

aggregated indices of nitrogen application Breckland and the Suffolk River Valleys where the prescriptions take and hence the figures presented in Table 4 the somewhat broader form of ‘do not over or under-graze’. The extent should be regarded as gross values. Dur-

”

ing the socioeconomic monitoring of the to which stocking rates have fallen is shown in Table 5. It should be

Suffolk River Valleys it was concluded that noted that the rates shown here are averaged over 12 months. This may there was no clear trend in fertilizer levels

which could be deduced for this region for

help explain why in some cases actual rates exceed the maximum set in

the period 1988-90 and hence it was the prescriptions. The maximum rate for the Broads - 3.7 lu/ha -

assumed that application levels would appears to be very high and considerably in excess of existing manage- have remained unchanged. ment practices.

Table 5. The impact of ESA guidelines on stocking rates.

ESA

The Broads Somerset Levels and Moors South Downs Breckland Suffolk River Valleys Test Valley

Pre-ESA stocking rate (lu/ha)

Post-ESA stocking rate (lulha)

Tier 1 1.84 1 82 Tier 1 1.5 15

T/er 1 0 96 1.01 Tier 7 0.87 0.91 Tiers 1 and 2 1.52 1.30 T,er 3 N/A 0.91

1 78 1.80


Table 6. Estimated net changes in output Again. the ‘policy-off’ scenario is important in determining the extent

levels, Suffolk River Valleys, 1991192. to which stocking rates would have changed in the absence of the ESA.

Wheat 5179 t This can be assessed by examining trends in similar non-agreement

Barley 3095 t :arcas by asking participants what they thought would have happenecl. Olseed rape Breeding ewes Fattening cattle riay Sllage

181 t - 5515 head

Obviously both approaches need to be uscci carefully but they will at . 678 head kast provide an indication of the direction and extent of the net impact * 2793 t - 1783t

of these ESA schemes. Overall, the most intensively used htnd has not been included in the ESAs. The fact that farmers have discretion ln ivhich fields to enter does mean thar the i)nes which arc unrereci arc those where existing practices are closest tc the ESA management prescriptions.

Changes in production I‘evrls. For many participants the ESA has had a negligible effect on their output levels. For some the only change will have been a reduced level of forage production due to restrictions on the earliest hayisiiage cutting dates. For others there has been a substantiai shift from arable to livestock production with, in some cases. the establishment of new enterprises. Such large-scale changes have been experienced in those ESAs with an arable reversion option.” Of these. the Suffolk River Valleys has undergone the greatest change in land use; some 1355 ha have been converted between 108X and 1992. on just over 100 holdings and representing 16% of the eligible arable area or 2Y’!6 of the agreement area. The net effects on output for the year lYY11Y2 are shown in Table 6.“’

Changes in output mix have been less pronounced in most of the other lowland ESAs. However. the introduction of arable reversion and crop margin options in the revised schemes may lead to ;i greater impact in the future.

Other impucts at the f&-m level. The effect of the lowland ESAs on iabour use again varies with the characteristics of the schemes. As would be expected, the greatest impact will be on those farms undergoing more profound changes in the level and composition of their output. In the South Downs it was estimated that there had been an overall reduction in the numbers employed on farms ,joining the ESA. In the Suffolk River Valleys it was found that the conversion of arable to grass led to a temporary increase in employment for fencing and sward cstabiishmcnt but over the first three years of the scheme the total number of farm workers fell by 3.5% on ESA farms. However, it was also estimated that during this same period a 10% reduction in employment would have been expected on these holdings and hence the

‘The area converted to grass (including net effect of this ESA may have been to slow down the underlying rate

field margins) amounts to 5136 ha by of loss of farm jobs.

1991, comprising 2455 ha in the Suffolk River Valleys, 2339 ha in the South Downs impact on farm incomes and the equivalent of 342 ha in Breckland. “‘The policy-off impacts have been in-

Most participants joined the ESAs with the expectation that their

corporated here. It was estimated that the incomes would at worst be maintained and preferably enhanced. In

arable area would have declined and beef virtually all instances this has proved the case. Extra costs have been and sheep numbers increased in the absence of the ESA. Some of the participat-

incurred, for instance for the clearance and maintenance of drainage

ing farmers were intending to revert arable ditches, but there have also been savings in fertilizer, lime and hcrbicidc

land to qrass at the time of the scheme’s usage. The overall impact on participant incomes is shown in Table 7 for introduccon, although not on the scale that v has manifested under Tier 3. Therefore the

the year 19X8/89. In the case of the Suffolk River Valleys. adjustments

figures appearing here are net of these have been made to allow for the policy-off outcome and hence thcsc estimated effects. values can be considered as illustrating the real impact on farm incomes.

112 LAND USE POLICY April 1994

Impact of ESAs on lowland farming

Table 7. Impact of the lowland ESAs on farming incomes, 1988/89.

ESA

The Broads Somerset Levels and Moors South Downs Breckland Suffolk River Valleys Test Valley

Overall income effect (f’OO0)

1 170

734 213 413

597 25

Average income effect per holding (f)

1 751

1 050 1 360 3 623

1 686 1 657

Average income effect per ha entered (f)

96

63 [J2 > J7] 35 [JI 35; J2 211

106

60 [Jl 60; JZ 190; J3 151 99

Table 7 shows the income effect per hectare, per holding and for each ESA as a whole. These latter values range from f25 000 in the Test Valley up to El.17 million for the Broads. The greatest impact on a per holding basis is in Breckland (f3623). In terms of the impact per hectare entered into the scheme the net income effect in some ESAs was almost equivalent to the annual payment. In the Test Valley and Suffolk River Valleys Tier 2 the net addition to income was in excess of the payments. In the Suffolk River Valleys Tier 3 the income effect was positive but very small: 515 compared with a payment of f200. This is a consequence of the high costs of fencing and grassland establishment as well as reflecting the relative difference between arable and livestock gross margins. A similar situation has arisen in the South Downs where an income effect of only f2l/ha was observed. It would, therefore, appear to make sense for a holding to revert arable land if this fits in with the overall farm strategy such as fulfilling the need for more grass or as part of a move towards retirement with an increasing proportion of the land being let out or the stock of machinery reduced.

These income effects should be viewed as ‘snapshots’ in that they show the preliminary short-run effects of the scheme in one year only, ignoring more long-term effects on fixed costs and finance charges. In addition, other costs are likely to be incurred arising from longer-term participation in the scheme as a result of deteriorating productivity and a build-up of the weed seed bank. Many of the participants had not considered the full implications of such factors on their operations, implying that the decision whether and to what extent to join the ESA had not been made within a rational, full-information framework. The role of the Project Officer as well as a host of other factors come into play when evaluating whether to participate, and these need to be considered by those planning and monitoring such schemes.

Effect on Exchequer costs

EC Regulation 1760/87 made provision for a contribution to be made to the cost of scheme payments incurred by member states. EC refunds were set at a level of 25% of the payments up to a maximum of 100 Ecu per hectare. Because in some ESAs the level of scheme payments given exceeds this limit, the refund is equivalent to less than the 25%. Table 8 shows the net cost to the Exchequer of the ESA schemes before and after contributions from the EC. Administration costs (including implementation and monitoring) are excluded because they are not available on a scheme-by-scheme basis.

None of the ESAs comes close to being self-financing in terms of savings in budgetary support costs (column one). The South Downs produces the greatest level of budgetary savings but these are only equal



Table 8. Impact of the lowland ESAs on Exchequer costs, 1988189.

“Russell and Froud, op tit, Ref 3.

On the whole, the first set of ESAs have been well received by

farmers, and a large majority of those who joined expressed a wish for


ESA

The Broads Somerset Levels and Moors South Downs

Suffolk River Valleys Test Valley

Savings in support payments (EWO)

0

6.0 (Tier 1) 180.0 (Tier 2)

18.0 (Tier 7 15.6; Tier 2 2.4)

53 (Tier 3) 0.851 0.717 79.4

0 NIA 0.024 NIA

Gross cost (exe administration and EC contributions)

(fm)

N/A

0.808 0.766 94.1 0.399 0.375 64.9 0.446 0.430 92.5

Net cost (excluding administration) (cm)

1.5

Net cost as % of payments

88.2

to 31% of the value of payments made to participants in this year. The savings in support payments increase over the length of the scheme, while Table 8 shows the impact in the first stages of these ESAs. For instance, in the Suffolk River Valleys there is a one-year lag from the time at which land is entered into an agreement and the time at which it will have been converted to grassland. By 1991192 the net savings in budgetary support costs were estimated to be approximately f35 000, leading to a net cost of the ESA of &53 000 (approximately 50% of the value of payments made to participants). I1 Corresponding information was not available for the other ESAs.

Other impacts on lowland farming

The reintroduction and/or expansion of grazing livestock enterprises in a region which is predominantly arable can have some particular local impacts. In the Suffolk River Valleys many farmers experienced difficulties in obtaining livestock, in particular calves for rearing. Local markets were not well developed at the time of the ESA’s introduction and hence animals had to be bought in from other regions. As a consequence of the lack of animals, as well as a reluctance on the part of some farmers to start up new enterprises with limited capital and expertise, a surplus of short-term grazing lets arose such that by 1990 the average rental paid had fallen by almost 40%. In the cases of some particularly inaccessible fields land was being grazed at no charge to comply with the ESA prescriptions. Undergrazing has been a consistent problem in the Suffolk River Valleys, and the proximity of the Broads ESA may have exacerbated these problems.

The question of to what extent any ‘halo’ effects might emerge was much debated during the early stages of these ESAs. It was thought that farmers might intensify operations on those pieces of land which were not entered into an ESA agreement in order to maintain their overall output levels. This would lead to environmental deterioration on adjacent land and hence to some extent negate the benefits secured on agreement land. There is very little evidence to date to suggest that this has happened, probably because most farmers only put their least intensively used land, ie the unimproved or semi-improved fields, into the most restrictive tiers, thus minimizing the impact on overall production levels. However, constant monitoring of this potential impact is important, with appropriate modifications to the scheme structures taking place where necessary.


the policy to be renewed. This is hardly surprising considering the positive effects on their incomes which the socioeconomic monitoring revealed. There have been difficulties in complying with particular guidelines in certain areas. The control of water levels in drainage ditches and dykes has been a problem, partly because of an extended period of dry weather but also because the individual may be unable to exert any influence on the water level, particularly if neighbours are non-participants or are arable farmers.

Most of the participants claimed to have already had an interest in the environment, which may have made them more likely to join an ESA.‘* Participation in the ESA, however, does not seem to have generally resulted in an increased awareness or interest in the environment. For many farmers the ESA represents a small proportion of an otherwise fairly intensive arable or mixed farm. Although the ESA payments are usually recognized as being financially beneficial, particularly at a time of increased economic pressures, participation seems to have had little impact on the overall farm strategy. The introduction of an optional conservation plan into the revised ESAs may help participants to consider the protection and enhancement of the landscape and wildlife on their whole farm, but in many cases the ESA is likey to remain peripheral. As indicated in Table 2, the proportion of the whole farm under ESA agreement varied from 12% in Breckland to 32% in the Somerset Levels and Moors.

Measuring the environmental impact of the lowland ESAs

The impact of the ESAs in terms of the landscape, historic features and biology has been undertaken by the Ministry of Agriculture, Fisheries and Food (MAFF);13 this information can be supplemented by the reports of the various voluntary and statutory organizations, such as the Royal Society for the Protection of Birds (RSPB).14 All findings are tempered firstly by the fact that in many cases it is still too early to conclude what the effects are on such factors as bird populations and species diversity, and secondly because the first few years in which monitoring took place were uncharacteristically dry in many of these areas and hence the transition to wet grassland management has been

‘*Evidence for this conclusion is ambig- uous as similarly large numbers of non-

hampered. The most obvious effects have been on landscape where in

participants as participants claimed to areas such as the Suffolk River Valleys the traditional pastoral land-

have an interest in the environment. These scape has been consolidated. However, in the Somerset Levels and proportions were 75% and 100% for the South Downs; 95% and 80% for Breck-

Moors and the Breckland MAFF reports that there has been an overall

land; 87% and 100% for the Somerset decline in landscape quality because of changes occurring on non-

Levels and Moors; and 94% and 80% for agreement land. The impact on landscape features such as hedgerows, the Suffolk River Valleys for participants Donds and woodlands has been eenerallv insignificant. This is not and non-participants respectively.

1 2

13MAFF Monitoring Reports (1991 and surprising as the nature of the relevant management prescriptions is

1992), op tit, Ref 4. fairly general, making them extremely difficult to implement. 14RSPB, A Future for Environmentally Sensitive Farming: RSPB Submission to

In terms of policy evaluation there is an increasing interest in attempts

the UK Review of Environmentally Sensi- to put a valuation on the environmental impact of these schemes in

tive Areas, RSPB. Sandy, UK. 1991. order to consider their cost-effectiveness and hence to compare differ- 15See, for instance, N.D: Hanley, ‘Valuing rural recreation benefits: an empirical com-

ent methods of creating environmental goods. Discussion of the relative

parison of two approaches’, Journal of merits of methods such as contingent valuation, travel cost, hedonic

Agricultural Economics, Vol 40, 1989, pricing and the household production approach is widespread.15 Eval- ~~361-374; and W.D. Schulze, R.C. uation of the environmental benefits of the South Downs and Somerset D’Arge and D.S. Brookshire, ‘Valuing environmental commodities: some recent ex-

Levels and Moors has been carried out by a team at Newcastle

periments’, Land Economics, Vol 57, University on behalf of MAFF. The appropriateness of the main 1981, pp 151-172. techniques currently in use to assess the values of environmental goods



The first and second round ESAs appear to have had some success in meeting their objectives of protecting and enhancing landscapes and wildlife and of supporting traditional livestock farming. The initial five-year schemes have been revised and replaced by lo-year ESAs. These modified first- and second-round schemes, implemented in 1992 and 1993 respectively, are more complex than their predecessors in that the number of options has been increased, the prescriptions have been tightened up in some cases and there has been a move towards whole-farm planning with the introduction of an optional conservation plan. More specific management is now required on certain key pieces of land; in return, payment levels have been enhanced. Additionally, in some ESAs, for instance the Suffolk River Valleys, the boundaries have been extended, mostly in response to campaigning by local groups. There was uncertainty as to whether the Test Valley ESA would be de-designated following a low and fragmented uptake with little impact in terms of environmental benefits.‘” However, even this ESA has been given an extended lease.

16K. Willis, G. Garrod, C Saunders and M. Whitby, Assessing Methodologies to Value the Benefits of Environmentally Sensitive Areas, ESRC Countryside Change Initia- tive Working Paper 39, Countryside Change Unit, University of Newcastle Upon Tyne, UK, 1993, p 27. 17The results of this exercise were unavail- able at the time of writing. “Because the ESAs are voluntary the production of any positive environmental outcomes will rest upon farms being encouraged to join and where possible enter land into the higher management options. This in turn will be dependent upon the presentation of the scheme and the scale of remuneration for any management changes required. ‘% is held that special conditions prevail in

in the spectrum of agricultural policy measures used in the UK.

this ESA. The ore-eminence of analina Moreover, because they are considered as decoupled, ie not directly

In November 1992 it was also confirmed that a third round of ESAs would be introduced with applications invited in the spring of 1993. Among this group are three more lowland ESAs: Avon Valley (5200 ha), North Kent Marshes (14 700 ha) and South Wessex Downs (45 900 ha). Consultation on a further set is also in progress and expected to be launched in 1994. Hence it is clear that ESAs are now firmly entrenched

produced by these ESAs is considered and it is concluded that contingent valuation is the most suitable, being ‘the only technique which is capable of measuring use and non-use preservation benefits of ESAs’.i6 These authors use three samples (ESA residents, ESA visitors and members of the public outside ESAs) to obtain estimates of the environmental enhancement resulting from the schemes, utilizing visual representations of typical landscapes with and without the impacts of an ESA. Individual responses have been aggregated in order to arrive at an overall value for the enhancement of the landscapes targeted by these ESAS.‘~

Although the environmental outcome of the ESA is of paramount importance in assessing its success and in making necessary revisions, the problems involved, firstly in identifying the environmental changes which are occurring as a consequence of the scheme and secondly in placing values upon them, mean that the other indicators such as net budgetary effects and farmer acceptability will inevitably be focused upon by policy makers.” Clearly these are inadequate on their own as they will underestimate the potential enhancement of conservation interests. However, any attempt to use economic values of environmental benefits (either on their own or when added to budgetary cost savings) in order to determine optimal levels of expenditure on environmental policies needs to be treated with extreme caution.

The future role of ESAs in agricultural policy making

interests has led to a low participation ;at& linked to the nroduction of narticular outnuts. thev are accentable in In addition, the ESA as a whole has been

1 1 1 , 1

the subject of some environmental decay terms of an eventual GATT agreement. Any government commitment

since the inception of the scheme, mainly to continuing to support agriculture is more likely to be realized in the due to recreational and urban pressures. form of this type of scheme in the future although more concentration



on the production of specific environmental goods would be desirable as a key part of such instruments. However, there is some danger that policies such as ESAs with explicit environmental objectives will be required to perform better in the future in terms of output reduction and in doing so may lose some of their value in relation to the production of fairly specific environmental goods.

The future of the ESAs, however, cannot be viewed separately from the sweeping policy reforms agreed in May 1992 and any subsequent modifications arising from an eventual GATT agreement. Because these policy reforms introduce effective production controls in terms of areas planted in the arable sector and the size of herds and flocks eligible for premia in the livestock sector, the decision that a farmer makes in terms of allocating land to various uses, including entering land into an ESA agreement, will now be made very carefully with reference to entitlement to support payments.

On the arable side, compensation for reduced support prices will only be given to producers on the condition that a certain proportion of their area of combinable crops is set aside. The decision to revert arable land to grass will have the effect of reducing the total base area and hence the area upon which crops can be grown. Conversion to grass will therefore have implications for the whole arable operation, not just those fields concerned. Farmers may also be reluctant to reduce their base arable area in the belief that future policy modifications may be based on historic land use patterns and hence such reversion of land will leave an

unfavourable legacy. In the grazing livestock sector opportunities to expand existing

enterprises or introduce new ones will be financially constrained by ineligibility for headage payments. An ESA participant in such a position will have three options: to make a claim from the national reserve; to buy or lease quota at some cost from another producer; or to raise animals without the considerable financial support of the premia. This may deter further participation in an arable reversion component of an ESA scheme. There may, however, be opportunities for some participants. The maximum stocking rate criterion for eligibility for beef and suckler cow premia will increase demand for grazing land in particular areas and hence ESA participants with new or existing grass may be able to let out grazing on a short-term basis. Many of those with ESA agreements are likely to have stocking rates of less than 1.4 lu/ha (in terms of animals upon which payments are made) and so will be eligible for the extensification premia of 30 Ecu per head.

Inasmuch as reduced support prices and quantitative restrictions upon headage payments are likely to reduce the intensity of grassland usage, the costs involved for existing and potential ESA participants in complying with ESA prescriptions will be reduced. These will combine to make the ESAs both relatively more attractive for those with grassland and less significant in the extent to which they affect lowland farming practices.

Conclusions

The lowland ESA schemes have on the whole been well received by the farming community. The reasons for this lie firstly in its voluntary approach but also in the positive impact that the policy has had in maintaining and enhancing farm incomes. In many cases participation in



an ESA has had only a minor impact on farming practices and hence upon the level and composition of output. Consequently there has been little conflict between the objectives of safeguarding threatened landscapes and their associated habitats and the farmers’ personal goals regarding incomes. To the extent that farm incomes have been sup- ported by the ESA payments, the rate of structural change within these areas will have been slowed down. The original threats of intensification and improvement are now less pressing than they may have appeared in the mid-1980s when these schemes were initiated. Other, newer threats may now become as important, including land abandonment and under-grazing in the more marginal areas. The ongoing CAP reforms discussed above pinpoint the clear need for a coordination of government policies so that the objective of arable reversion in particular, now included in most of the revised ESA schemes, is still a feasible option.


the impact of esas on lowland farming

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