Policy paper

Government response to the Rock Review: full report

Updated 25 May 2023

This was published under the 2022 to 2024 Sunak Conservative government

Applies to England

Ministerial foreword

Following the UK Farm to Fork Summit last week (16 May 2023), the government has today set out its next steps to support tenant farmers who are at the heart of our rural economy.

From day one of the agricultural transition, we have worked with tenant farmers as we co-designed our farming schemes, utilising their knowledge and experience through tests and trials and pilots to help inform and develop our schemes so that they are accessible to all.

We recognise how critical the tenanted sector is to a successful agricultural transition and understand the unique challenges faced by tenant farmers and the need to support the long-term sustainability of the sector.

I would like to thank Baroness Rock and the Tenancy Working Group (TWG) for their time and dedication in producing the Review. Recognising how critical the tenanted sector is to a successful agricultural transition, we commissioned the Group, chaired by Baroness Rock, to carry out a comprehensive review of tenant farming in England. We wanted expert input into our work so that our policies work for tenant farmers.

The Review sets out 75 recommendations across 6 broad themes:

• improving the tenant-landlord relationship
• ensuring the growth and viability of businesses in the tenanted sector
• preventing tenant farmers from going bankrupt
• minimising the loss of land from the tenanted sector
• reducing scheme complexity and ensuring flexibility and access for tenants
• public support for permanent land-use changes including tree planting and the creation of habitats

Today’s response builds on the considerable progress that we have made since the Review was commissioned. For example, we have:

• expanded the offer of our environmental land management (ELM) schemes
• designed the Sustainable Farming Incentive (SFI) to be as accessible as possible to tenants, with the addition of six new standards in 2023, making a total of 9 standards
• introduced 3-year SFI agreements to make it easier for tenants to participate
• selected projects involving tenants working with other farmers and land managers in the first round of the Landscape Recovery (LR) scheme – this represents around half of the 22 LR projects
• confirmed that we would deliver the aims of the Local Nature Recovery (LNR) scheme by evolving Countryside Stewardship (CS) instead of building an entirely new scheme – this is in line with the Review’s recommendations, as tenants are already familiar with the way it works
• made changes to the Farming Equipment and Technology Fund to allow local authorities to be the applicant, as the Review referenced the need for joint agreements with county councils
• made sure that our productivity grants are accessible to tenant farmers – including the £168 million of investment we will launch across 2023
• lowered the minimum limit for the Farming Equipment and Technology Fund to £1,000
• launched a consultation on extending Inheritance Tax (IHT) relief to include land in ELM schemes, which will provide landlords and tenants with more flexibility to diversify their land – this tax consultation also explores an option to limit IHT relief to land let out for a minimum of 8 years, which could provide tenant farmers with greater certainty over the length of tenancy agreements
• opened a call for evidence on the taxation of ecosystem service markets to understand the commercial operations and the areas of uncertainty in respect of taxation – this should give tenants and landlords more confidence to invest in and securely access payments from these new markets, opening new revenue streams for the sector
• published the Nature markets framework, which provides greater clarity on the principles that will guide the development of UK market mechanisms for carbon and other ecosystem services and set out next steps including arrangements to develop a suite of investment standards for nature markets

We strongly agree with the Review that tenant farmers should be able to:

• access farm offers
• make their essential contribution to restoring the natural environment
• produce food for the nation

We are bringing forward a range of recommendations from the Review relating to our ELM schemes which introduce more accessibility and flexibility of contracts, to give tenants and landlords better options.

We are establishing a new Farm Tenancy Forum to facilitate our engagement. We are inviting industry organisations which represent tenant farmers, landlords and professional advisors working in the sector to be members of this group. We expect the implementation of our commitments to be a key focus of the Farm Tenancy Forum.

A terms of reference for the Farm Tenancy Forum is published alongside the government response.

The Review also recommends examining the potential need for an independent Tenant Farming Commissioner or ombudsman in England. In response, we will be launching a call for evidence this summer to explore:

• the benefits and impacts of how this might work in practice
• how such a role might fit within existing procedures and regulations

Tenant farmers are vital to our ambitious commitments across food security, the environment, climate change and levelling up rural communities.

The legacy of the Rock Review will ensure that tenant concerns are heard and addressed through our policies and schemes, and we will continue to engage with the Farm Tenancy Forum and the wider sector as we implement its recommendations and move through the agricultural transition and deliver on these commitments.

Rt Hon Thérèse Coffey MP
Secretary of State for Environment, Food & Rural Affairs

Rt Hon Mark Spencer MP
Minister of State (Minister for Food, Farming and Fisheries)

Introduction

This document sets out the government’s response to the Rock Review on tenant farming in England.

Tenant farmers are at the heart of our rural economy. A diverse and vibrant tenanted sector is vital to the future of agriculture. It is also essential in achieving the government’s commitments across:

• food security
• environment
• climate change
• levelling up rural communities

We are undertaking the most significant reform of agricultural policy in England in decades as we move away from the European Union’s Common Agricultural Policy (CAP) and the CAP’s subsidies for land ownership and tenure.

We are reinvesting that budget of £2.4 billion a year into a range of new schemes to:

• pay farmers and land managers for providing environmental goods and services alongside food production
• provide one-off grants to support farm productivity, innovation, research, and development

These reforms are essential to help us:

• grow and maintain a resilient, productive agriculture sector over the long term
• achieve our ambitious targets for the environment and climate, playing our role in tackling these huge, global challenges

Tenant farmers are an important part of the social and economic fabric of rural communities across England. Renting land through a Farm Business Tenancy (FBT) agreement also provides a way into farming for new entrants who do not have a family connection to land or capital to buy land. They also provide a flexible way for farm businesses to grow and respond to market changes.

In February 2022, recognising how critical the tenanted sector is in achieving a successful agricultural transition, the then Secretary of State George Eustice commissioned the TWG, chaired by Baroness Rock, to carry out a comprehensive review of tenanted farming in England.

The Rock Review (the Review) was published in October 2022.

The government thanks Baroness Rock and the TWG for the Review. We accept the majority of the Review’s recommendations and we have already begun implementing many of these. This response sets out the progress made so far and the further actions the government will take to implement certain recommendations of the Review.

This response covers tenancies within England unless otherwise stated. We are working with the devolved administrations to consider the territorial impacts of initiatives discussed in the Review.

The numbering of recommendations in this response reflects that of The Rock Review: full report (recommendations 1 to 74).

Through our analysis of the Review, we identified an additional recommendation on page 19 of the Review (immediate headline recommendation 9) which is not numbered or listed in the full report, bringing the total to 75.

Overview

Tenants face unique issues and business choices. They play a vital role in our rural communities and food production.

We agree that we must do more to consider their views in policy development to make sure tenants can access our funding. We will take steps to further embed these considerations in policy making.

The Review sets out that longer agreements have benefits for farmers. We agree and want to encourage these while supporting landowner rights and providing flexibility for shorter-term tenancies where necessary.

We agree with the Review’s argument that a thriving tenanted sector relies on a collaborative relationship between landlord and tenant.

This is a commercial relationship between landowning and farm tenancy businesses. As the Review notes, in many instances landlords and tenants are already working together – collaborating positively and effectively.

The role of government is to create a regulatory environment which supports landlords and tenants working together towards mutual benefits – encouraging land into the let sector. At the same time, we want to make sure that tenants are protected from abuse and poor service.

In developing this response, our focus has been on:

• supporting and encouraging collaborative relationships between landlords and tenants
• helping rural communities thrive through flexible tenancy lengths that benefit both landlord and tenant
• giving tenants and landlords confidence in government policies so they can plan through the agricultural transition

Environmental land management (ELM) schemes

We strongly agree with the Review that tenant farmers should be able to:

• access farming offers
• make their essential contribution to restoring the natural environment
• produce food for the nation

If we are to meet our ambitions for a thriving agricultural sector and restored natural environment, farming schemes must be designed appropriately to ensure tenant farmers can access them.

In response, and by working with tenant farmers and the TWG on our schemes from the beginning, we have designed our farming offers to be simple, flexible, and accessible to as many types of farmers and land managers as possible, including tenant farmers.

At the end of 2022, we confirmed that we would deliver the aims of the Local Nature Recovery (LNR) scheme by evolving CS instead of building an entirely new scheme. This is in line with The Review’s recommendations as tenants are already familiar with the way CS works.

This section describes the changes we have already made and those that we will implement as we continue to roll out our offers.

Increasing tenants’ access to a wider range of scheme options

We know that tenants can find it harder to access and deliver longer-term options and options that involve land-use change. Tenants can be restricted by the duration of their tenancy agreement or the type of actions it permits.

The Review made several specific recommendations in relation to this issue.

Making more options accessible to tenants

Different types of options require greater or lesser degrees of landlord consent or involvement.

For options that change the value or use of the land, landlords have a legitimate interest and should have the opportunity to consent to these options.

For options that do not change the value or use of the land, tenants should be able to undertake and get paid for them without specific landlord consent. That is why we are designing all our new farming schemes to empower tenants and minimise bureaucracy on both tenants and landowners as much as possible. For example, the SFI does not require specific landlord consent in the application.

The Review requested that we provide clarity on the duration of each option and specify which options will require permanent land use change (recommendations 23, 24). We agree this would be helpful so, where possible, we will specify the duration of each option and highlight which options require which level of land use change from current agricultural land uses.

Examples of land-use change from agriculture include:

• changes in land management (for example, planting cover crops to reduce soil loss; reducing fertiliser use to prevent water pollution)
• changes in land cover (for example, creation of hedgerows)
• changes in agricultural use (for example, to agroforestry)
• changes away from agricultural use (for example, to woodland or restored peat)

This should make it easier for tenants to understand which options they can access easily, and which ones will require further discussion and agreement with their landlord.

We have already made a range of options available in the SFI terms and conditions, which makes them more accessible to tenant farmers. In response to the Review, we plan to offer more options on these terms and conditions from 2024, further expanding the variety of options tenants can access for shorter periods and without requiring landlord consent.

Taxation of ELM schemes

The Review notes that HM Treasury (HMT), HM Revenue & Customs (HMRC) and Defra are considering the evidence that IHT might be a potential barrier to the take-up of our schemes and ELM activity in some situations, including for tenant farmers.

As announced at Budget 2023, the government is exploring the scope of agricultural property relief from IHT. A consultation on the taxation of environmental land management and ecosystem service markets was published on 15 March 2023.

The aim is to explore the extent to which the current scope of agricultural property relief may represent a barrier and, if necessary, potential updates to the scope of the existing land habitat provisions in the relief.

This has been received positively by farming and environmental stakeholders.

Simplifying our scheme offers

The Review notes there are various ELM offers available across different schemes and that the woodland creation offers are particularly complex.

We agree there is a need to bring together schemes which support tree and woodland into a central location (recommendation 30). Our shared ambition and vision is to deliver a unified single service which provides a joined-up experience for users. This will have consistent design principles and standards so that all applicants can access a simple and cohesive set of offers.

This is why we have committed to making the England Woodland Creation Offer (EWCO) part of the enhanced version of CS by 2025. We are looking at how other tree planting schemes and environmental offers such as Farming in Protected Landscapes can be offered so that there is a clear, consistent and reliable way for people to find and apply for funding.

Structure of longer-term options

The Review recommends that any options within schemes that require more permanent land-use change should be structured as a short up-front agreement, followed by maintenance agreements that are annually renewed, unless otherwise instructed, or long-term with no-penalty exit clauses (recommendation 24). This would be to support tenants to engage in actions that go beyond their tenancy length.

We agree this would be helpful, in cases where the options lend themselves to this sort of approach. Where appropriate, we will offer standalone capital items separately to longer-term revenue options. We will also look at how landlords and tenants can take part in ways that work best for them. F

We have also acted to make sure LR works for tenants. The first round of LR was open to any land manager or groups of land managers, including tenant farmers, that could pull together a 500 to 5,000 hectare (ha) project of broadly contiguous land in England.

Applicants were required to:

• demonstrate management control of the land, or the consent of those with management control, for the duration of the project development and implementation agreements

• confirm that any tenants within the project area had been engaged prior to application and were supportive of the project moving forward into project development, ensuring fair distribution of the work and rewards from scheme

Around half of the 22 projects selected in the first round involve tenants working with other farmers and land managers. Our assessment is that the design of LR means the scheme works for tenants and so we have adopted the same approach in the design of round two which launched on 18 May 2023. We will continue to test and refine this with farmers including tenant farmers and landlords as we open future rounds and move to implement the projects.

Making ELM agreements transferrable

We want tenants to be able to take part in schemes for the duration of their tenancies. Where options extend beyond that period, we would like them to be continued for their full duration, even if that goes beyond the end of the tenancy agreement.

The Review recommends that we make our schemes transferable so that tenants can transfer a longer-term agreement on to the landlord or next tenant (recommendation 13). This is to help make schemes more accessible for tenants on shorter-term tenancies.

We have committed to making it as easy as possible for farmers to apply for our schemes. In some circumstances, it may be simpler for farmers to create new scheme agreements rather than transferring existing ones between different land managers when there is a change in management control of the land.

We will work with tenant farmers and landlords through the new Farm Tenancy Forum – see commitment to establish a new group under Strengthening landlord-tenant relationships – and ELM co-design, to look at what works best for them in practice. If they assess that introducing transferable agreements is a feasible and preferred solution, we will reflect that in scheme rules.

Landlord consent and countersignatures

In the past, tenants needed to obtain their landlord’s consent before applying for schemes. This was to ensure they did not inadvertently sign up for actions which might conflict with the terms of their tenancy agreement or the interests of their landlord.

Undoing the actions Defra has paid for would also put the tenant in breach of their scheme agreement, which could lead to repayments and penalties.

We now have a significantly broader offer across our schemes. One of our key aims is to make schemes as simple as possible to apply for. We agree with the Review’s recommendation that, where appropriate, the tenant should be able to unilaterally enter tenanted land into schemes without evidence of landlord consent, where the scheme length is the same as the length and terms of the tenancy agreement (recommendation 14).

We have designed the SFI scheme so that tenants:

• can enter without their landlord’s explicit consent (we do ask that tenants check their tenancy agreements before applying)

• with shorter tenancies, including annually renewing tenancy agreements, can enter if they expect to have management control for the length of their 3-year agreement

• are not required to pay a penalty to Defra for ending their SFI agreement early if they unexpectedly lose management control of the land

Due to the SFI’s rolling application window (no application deadline) and simple application process, it is easy for an incoming tenant to apply for their own SFI agreement on the land.

We have continued to simplify the scheme and make it more flexible in response to learning from our pilot and early scheme rollout. All farmers can choose the range of options that works for them and add to their agreement each year.

In CS, we allow countersignatures when the tenant does not have security of tenure for the duration of the agreement. By countersigning, the landlord is agreeing to take responsibility for delivering the CS agreement if the tenant leaves the land before the agreement is complete.

As we evolve CS and expand the SFI, we are making the rules around duration and consent more flexible to suit different options and remove unnecessary barriers to entry for tenants.

One area is around tree planting. To meet our commitment in the England Tree Action Plan that tenants will support tree planting commitments, we have ensured that where tenants are eligible to apply for the EWCO on tenanted land, both tenants and landlords will need to agree to the proposal.

We have designed our tree schemes to support the succession of agreements between landowners and tenants, subject to our standard eligibility and due diligence checks. This is where an agreement is passed over to a landlord or new tenant when the original tenancy comes to an end.

EWCO is currently reviewing and developing a change of management control and succession policy that works for both tenants and landlords.

This follows the proposals from the Review to:

• make it easier for a landlord or new tenant to take on a grant agreement from the outgoing tenant

• provide guidance on liability and reclaims should management control change

We are exploring how to bring this approach into other ELM schemes as EWCO folds into CS in 2025. This could be limited in scope to woodland creation or be broader to cover all relevant ELM activities.

We agree with the Review that joint tenant-landlord agreements could provide a helpful solution to consent issues (recommendation 14 and 38).

This would enable tenants to undertake options which require permanent land-use change and for landlords and tenants to formally share the work and rewards from scheme agreements. By doing this, we are giving tenants the flexibility and agency to take more decisions on how they use their land in a way that makes the most sense for their business and fits alongside their primary role producing food. We propose to take this recommendation forward by testing this approach initially through EWCO in 2023. Any future policy will be decided in consideration of the impacts on food production and security.

Ensuring fair distribution of the work and rewards from schemes

We are designing our schemes to create the conditions for fair, equitable and positive participation in ways that work for both tenants and landlords. Equally, we want to avoid any perverse incentives of what landlords can or cannot do, which could indirectly limit the supply of tenanted land.

As raised in the Review, we agree the need to address cases where landlords are not fairly sharing scheme payments.

The Review sets out some specific solutions to support a fair distribution of work and rewards.

Landlord eligibility requirements

Landlords are currently eligible for CS where they have retained management control of the land. LR applicants will need to show that they have management control or the consent of those with management control for the duration of the project development or long-term implementation agreements (or both). This means it is likely that landlords will be involved in the projects. Landlords are not eligible for the SFI when they are not actively farming the land.

We agree it is reasonable to require landlords to engage with their tenants before applying for schemes and to get their tenant’s support on their application (recommendation 22). We will consider how we can introduce this as we develop the scheme.

The Review also recommends that landlords wishing to enter tenanted land into scheme options that require permanent land-use change, should only do so:

• jointly with the tenant, and;
• only with consent of the tenant (recommendation 14)

We want to support tenants and landlords to work together to deliver the best outcomes for their holding, without necessarily restricting options available to landlords which could cut across their legitimate interests and create perverse incentives. This recommendation could put pressure on tenants to pick up the management of those environmental features, even when that might not be of interest to the tenant or within the scope of their tenancy agreement.

Equally, limiting landlords to only being able to enter schemes jointly with their tenants could discourage landlords from tenanting land at all. They may explore contract or share farming instead to maintain the freedom to enter schemes on their own.

For those reasons, we propose to focus on:

• supporting greater collaboration between tenants and landlords

• looking to adapt scheme design to make that more likely

Implementing restrictions on landlords after taking land back in hand

The Review recommends several restrictions on landlords to mitigate the risk of unreasonable land resumption (taking land back) from a tenant farmer for the purpose of tree planting or to enter land into ELM schemes themselves.

Suggestions include:

• a buffer period between landlords taking land back from tenants and putting it into a scheme

• specific requirements on landlords taking on scheme agreements from outgoing tenants (recommendation 14, 35)

After 20 years’ worth of agri-environmental schemes in England, there is limited evidence that any such practices are routinely happening. The area of rented land has remained stable over the last 5 years and the area of land rented for a year or more under FBTs is higher now than it was in 2020.

However, this government supports the tenanted sector, and we agree with the importance of identifying and mitigating any risk in this area. We will continue to monitor trends and will ask the new Farm Tenancy Forum to explore this alongside other land availability issues highlighted in the Review (see commitment to establish a new group under Strengthening landlord-tenant relationships.

In the near term, we are testing some possible ways to prevent unreasonable land resumption in EWCO.

In 2022, we made changes to the EWCO eligibility based on feedback that we needed to clearly identify where land put forward for EWCO by a landlord had been subject to a dispute with a tenant. Landlords cannot apply for funding on any land that is or has been subject to dispute within the last 12 months. For example, a contested notice to quit. This must be declared in the EWCO application form.

This information is helping us track the impact EWCO is having on land resumptions.

We are building this learning into ELM and are looking at the feasibility of a condition in our eligibility guidance for ELM schemes that the land must not be subject to an active, unresolved dispute between the landlord and tenant.

Woodland creation and management

We have described how we are learning from current tree planting offers to ensure tenants can benefit from these schemes.

The government has ambitious plans to increase tree planting across the countryside to:

• support the decarbonisation of the economy

• boost timber security

• create space for nature and people

The Review notes that tenants may be excluded from the opportunities of tree planting as, often, the terms of their tenancy agreement mean they cannot apply and that more trees mean less land for tenants.

We see tenants as key contributors to our tree planting targets, alongside their primary role in food production.

The Environmental Improvement Plan and England Tree Action Plan note the need for a diversity of trees and woodlands within our landscapes, including many smaller woodlands that are part of farm businesses. For that to happen, tenants can and should be able to access and benefit from our woodland creation offers in a way that is fair and proportionate to both tenant and landlord.

The Review sets out a series of further solutions specific to woodland creation to better include tenants.

Collaboration between landlord and tenant in tree planting

As the Review sets out, a good relationship between landlord and tenant is one of the best ways to ensure tenants can benefit from longer-term land management.

So, in addition to the work on EWCO, we have worked with the Tenancy Reform Industry Group (TRIG) to develop guidance for how tenants can approach tree planting and woodland schemes such as EWCO.

This guidance is now published by the TRIG on the Central Association of Agricultural Valuers (CAAV) website. It is based on good, open communication between tenants and landlords, that establishes the motive for planting and a clear plan of what happens at the end of the tenancy regarding the tree planting project.

Following the Review, we have assessed this guidance and believe it is consistent with the spirit of several of its recommendations. However, we will keep the guidance under review and will continue to take account of the Review’s recommendations as we roll out our offers.

Planting small numbers of trees and agroforestry

It is usually easier for tenants to undertake small-scale tree planting.

For this reason, the Review asks that Defra schemes support the creation of trees or shrubs on areas of land less than 0.5 ha – such as hedges, verges, for screening and shelter belts (recommendation 32). We agree with the need to have both small- and large-scale tree planting offers and that is why we reduced the minimum scale of woodland creation eligible in EWCO. This also makes supporting decarbonisation possible whilst retaining a focus on food production.

We see the inclusion of agroforestry, where trees are integrated into agricultural management, as one way that tenants can support and benefit from government commitments to plant more trees. This will enable tenant farmers to consider planting trees alongside and as part of their other business interests, including primarily food production.

We are testing a farm woodland standard through the SFI pilot and we have confirmed we will allow for a range of planting densities including smaller-scale tree planting within the SFI. We are also looking at developing more offers in evolved CS for higher density tree planting.

We are committed to designing our agroforestry offers to be responsive to tenants’ needs and make them accessible for all. Tenancy stakeholders, tenants and landowners are involved in the scheme design process ahead of finalising details for 2024.

The Review asks that agroforestry be classified as non-permanent land-use change, so the tenant does not need landlord consent (recommendation 37).

We currently define woodland creation as a permanent land use change to secure the long-term benefits of what is a multi-generational process. Landlords have a legitimate interest in such matters.

We do however recognise that permanency can limit tenant opportunities for engagement, and there is an important question about exactly how land use changes are defined and treated in a way that is fair and workable for all and delivers our intended outcomes. We consulted on a proposal to adjust forestry permanency requirements in the Nature Recovery Green Paper (March to May 2022) and followed this up recently with more in-depth discussions with stakeholders.

We have since commissioned our Trees and Woodland Science Advisory Group to conduct an evidence review over the next few months to provide detailed advice on the Review’s proposal. If there is a case for removing the permanency requirement for certain kinds of tree-planting, we will ensure this is done in accordance with the landlord’s legal rights to their land.

Agroforestry sits across agricultural and tree systems. Defra agrees with the TWG that the value of forestry, agriculture and agroforestry systems must be treated equally as they are all land use systems that have key roles to play.

Related to the ‘permanency’ of agroforestry, we are in the very early stages of investigating how best to explore how agroforestry is recognised as an ‘agricultural activity’ and identified under the appropriate land use classification. We agree there is a need to take a decision as to where agroforestry sits between these two land use systems. The recommendations in the Review will continue to support our thinking as we work through these issues.

Tree planting on quality agricultural land

This government is committed to food security, nature recovery and net zero. These goals can and must go hand in hand. However, we recognise that these commitments, alongside others across government, create significant and sometimes competing demands on our land.

The Review notes a concern that large businesses could purchase land to convert at scale into non-agricultural use with detrimental impacts on food production. To limit any negative impacts on food security, the Review recommends that woodland planting should not take place on high quality agricultural land (recommendation 33).

We currently have processes to ensure that woodlands are created where most appropriate, including accounting for the impact on food production. Woodland creation applications are assessed under the Environmental Impact Assessment (EIA) (Forestry) (England and Wales) Regulations 1999. Screening under this process includes consideration of woodland creation’s implications for high-grade agricultural land.

This provides flexibility for farmers (including tenants) to undertake land use change where there will not be a significant impact on food production and will help us to deliver our environmental targets.

To further enable a strategic approach to using our land across England, we committed to publish a Land Use Framework in 2023, in the Food Strategy. We also expect the drafting of Local Nature Recovery Strategies will support local discussions regarding the most appropriate sites for nature recovery.

We need farmers and other land managers to improve the natural environment, alongside food production, with environmental goods and services playing a key role in all farm businesses. 

Productivity and innovation grants

The Review recognises the work Defra is doing to encourage farm productivity and innovation. Improving productivity through innovation, collaboration and business planning is a key outcome of our schemes and grant offers.

The Review notes that there is a need to ensure tenants can access the wide range of offers we are delivering, such as the £168 million of investment we will launch across 2023 (recommendations 27 to 29).

We agree that the land tenure of a farmer should not limit their ability to access these offers. That is why we have designed all our productivity and innovation grants, including the Farming Investment Fund and Farming Innovation Programme, so that tenants are able to apply.

The nature of these grants means that:

• tenants are well placed to benefit

• they are easy to access for all farmers

Our assessment is that many tenants have benefited from our offers to date but we will act on the findings of the Review to make that more likely.

For example, in response to feedback from the sector including the Review, we reduced the minimum grant to £1,000 for future rounds of the Farming Equipment and Technology Fund (FETF). This made the Fund more accessible for tenants. We will continue to keep this under review to help ensure it remains as accessible as possible.

The Review also sets out some specific recommendations on our grant offers.

Joint grant applications

The Review recommends we allow joint applications to productivity schemes from both landlord and tenant. This would enable better collaboration between the 2 parties (recommendation 28).

We agree and indeed we already allow some forms of joint applications, for example:

• from tenants and landlords applying jointly for grants as a single legal entity, or
• where one business agrees to become the lead applicant.

However, following the Review, we recognise that the system may not be widely understood. We have reviewed how we communicate this through scheme guidance, and we will work with the new Farm Tenancy Forum (see commitment to establish a new group under Strengthening landlord-tenant relationships) to explore whether we need further specific guidance on how to undertake collaborative grant applications between tenant and landlord.

The Review also made specific reference to the need for joint agreements with county councils (recommendation 29). We agree with this recommendation and have subsequently made changes to the FETF scheme to allow all local authorities and councils to be the applicant.

Local authorities are not currently eligible to apply for the Farming Transformation Fund (FTF), but we agree, where possible, to amend policy for future grant rounds to allow a more collaborative approach with councils. We will provide further detail in line with new grant round announcements.

New entrants

Attracting and enabling bright new talent into land-based business is vital for a sustainable and productive agriculture sector.

We agree with the Review in recognising that the tenanted sector has an essential role as a route into farming for new entrants. Data from the CAAV (published in 2021) generally shows that, where there is a change of occupier, 20% to 30% of lettings are typically to a new entrant.

The Review recommends embedding tenant issues into any thinking and policy development around new entrants and how we support more people to join the farming sector (recommendation 39).

We agree this is important and we are already helping to address this by funding the New Entrants Support Scheme pilot. This is trialling approaches to building entrepreneurial capacity in selected new entrants and increasing their opportunities to access land and finance.

We have considered the more detailed recommendations (recommendations 38 to 45) made in the Review. As a result we will commit to:

• assess specific benefits for tenants as part of the development of the New Entrants Support Scheme

• involve tenancy industry bodies such as the Tenant Farmers Association (TFA) to be part of a stakeholder advisory group in supporting New Entrants policy design

• share data on the number of tenants that sign up to pilots and use the feedback we get from tenants to embed tenant farmer thinking back into policy design

• look at the extent to which the New Entrant Support Scheme pilots support people to gain new tenancies

• present emerging findings from the pilots to the new Farm Tenancy Forum seeking their feedback on how we can improve the scheme (see commitment to establish a new group under Strengthening landlord-tenant relationships)

Private markets and natural capital

We want farmers and land managers to confidently and securely access payments from the private sector for the environmental benefits they produce. This is essential for the level of investment in the environment that we need to meet our targets.

In 2021, we set an ambitious target to raise at least £500 million yearly in private finance to support nature’s recovery every year by 2027 in England. This rises to more than £1 billion by 2030. Tenants need to be a part of this to deliver and benefit from it.

The Review recognises the increasing role of private markets. It notes there are risks to tenants, particularly around who benefits from private markets.

As custodians of over 70% of land in England, farmers will need to be key participants in nature markets and are well-placed to benefit from this emerging opportunity.

Defra is committed to supporting farmers in accessing green finance opportunities, for example, through the design of our ELM schemes and access to capacity-building support through schemes such as Natural Environment Investment Readiness Fund (NEIRF).

We are designing our new schemes to provide a private funding framework for farmers, including tenants, to operate within.

For SFI applications in 2022, we confirmed that farmers can enter the same area of land into an SFI standards agreement and a private sector scheme arrangement, such as carbon trading or payments for natural flood management, subject to scheme rules.

We are designing evolved CS to work alongside private schemes and markets for high-quality, accredited environmental outcomes, to support farmers and land managers to obtain funding from different sources.

Through the LR project development phase, we are supporting the chosen projects to explore bespoke funding arrangements combining public and private funding.

We agree with the Review that all farmers should be rewarded for the activities they carry out (recommendation 46). This is why we have designed our ELM schemes so that payments go directly to those carrying out the activity, where possible.

We agree with the recommendation that Defra should support the development of private market codes and associated payments for soil and other forms of on-farm carbon and biodiversity gain (recommendation 51).

The UK pioneered the development of private investment mechanisms for woodland creation and peatland restoration through the UK Peatland Code and UK Woodland Carbon Code.

We recognise the need to build a more comprehensive suite of standards to support investment in the full range of ecosystem services that farmers and natural resource managers want to provide. We are currently supporting projects to develop and prototype new investment models through the NEIRF.

To further support the sector to engage in nature markets, Defra asked the Green Finance Institute to work with the finance and farming sectors to explore how private sector sources of finance can be more swiftly unlocked at scale to support the farming transition, including how to resolve the specific barriers faced by tenants.

The recently published report Financing a Farming Transition is the result of a collaboration between farming groups – including the TFA – banks, supermarkets, and service providers.

It identifies barriers and corresponding enablers under the themes of:

• data access and availability
• priority environmental outcomes metrics
• environmental markets framework and principles
• aggregation models

This report picks up the specific recommendations set out in the Review and recommends the government take a balanced approach to the rights of tenants and landlords in supporting these new markets. Defra is progressing work in each of these areas and will carefully consider the Review’s recommendations to inform future work. 

We are also working with the British Standards Institute on a fully consultative business-led process to co-design and develop an investment standards framework for ecosystem service markets, with a roadmap for implementation. This is likely to include:

• an overarching standard outlining principles and rules that all ecosystem markets should follow

• additional detail on how this will be applied in individual markets

• up to 9 individual standards which provide detailed methodologies for quantifying ecosystem services to meet identified gaps within the framework

To support this, the Review suggests that tenants and landlords should be provided with a consistent way to measure the environmental state of a holding (recommendation 49).

Through the Natural Capital and Ecosystem Assessment programme we are looking at Citizen Science approaches that have the potential to be adapted for use by farmers and land managers for monitoring. This activity could have the potential to inform any future development in this space. Access to data in a standardised way would also need to be considered.

We will consider this recommendation in more detail as we continue to develop policy in these new and emerging markets.

Nature markets are at an early stage, and it is important we take a phased approach to market development. This is why we have published the Nature markets framework, which provides greater clarity on the principles that will guide the development of UK market mechanisms for carbon and other ecosystem services and set out next steps including arrangements to develop a suite of investment standards for nature markets.

We understand there are specific difficulties and questions around how tenants can best access these markets and we are grateful for the Review’s consideration of this issue and their recommendations in this space.

We will commit to exploring how to best support tenants to access nature markets, consulting the new Farm Tenancy Forum, where necessary, and will embed any findings back into policy decisions as appropriate (see commitment to establish a new group under Strengthening landlord-tenant relationships).

The Review recommends that HMT, HMRC, and Defra work together to clarify the tax treatment under the existing rules of the production and trade of ecosystem service units (recommendation 52).

As announced at Budget 2023, the government is exploring elements of the tax treatment of ecosystem service markets and a call for evidence was published on 15 March 2023. The aim is to understand the commercial operations and the areas of uncertainty in respect of taxation.  

Strengthening landlord-tenant relationships

The Review notes that there are many positive examples of collaboration between landlord, tenant, and the advisors they work with. It also describes that in some instances this collaboration does not exist or is not effective. The Review recommends several ways the system could change to better enable a positive relationship.

We agree with the assessment that in most instances relationships between landlords, tenants and others is positive.

We have sought to ensure we are not making changes that might, in addressing the poor practice of a minority, have a negative impact on the overall positive picture of most landlord-tenant relationships.

Central to our response is putting in place more formal engagement and feedback structures between Defra and the tenanted sector. This will allow the sector to work with us to provide regular feedback on trends in tenant-landlord agreements and report any emerging issues that may need addressing.

We propose to do that in part through a new formal Farm Tenancy Forum. This will replace the current TRIG and build on the valuable work it has delivered over many years. We will invite membership to this group from industry organisations representing tenant farmers, agricultural landlords and professional advisors who work in the sector.

This new Forum will:

• support the implementation of the government response to the Rock Review, feeding back real-world experience and insight on progress
• meet quarterly with the Farming Minister in attendance to provide Defra with regular updates on how the sector is progressing and adapting throughout the agricultural transition
• provide regular feedback on the tenant-landlord relationships and agreements and report any emerging trends that may need addressing
• feed in evidence and insights to Defra’s scheme and policy development, and on any matters related to agricultural tenancy legislation
• consider how new schemes are impacting the tenanted sector
• develop and disseminate codes of practice and standards of conduct to monitor and report on their uptake by the sector

This will ensure Defra has ongoing and regular feedback on tenant farming issues. Defra will dedicate more departmental resource to this group, providing full secretariat resources to support the work of the Forum. This will deliver more oversight of the sector by both industry and government working together.

We have published the terms of reference for the new Forum alongside this response.

The rest of this section covers the main issues the Review highlighted and our response to its recommendations.

Guidance and codes of practice

The Review is concerned that there can be a power imbalance in the relationship in the tenant-landlord relationship. The Review highlights that whilst many landlords and land agents do work collaboratively and progressively with their tenants, some landlords are absent or have negative relationships. This can result in poor mental health and stress for some tenant farmers and their families.

We agree with the Review’s recommendation that Defra and sector trade bodies should address this by commissioning an industry-led code of practice to set out standards of expected behaviour for all parties in the sector and to help encourage more collaborative tenant-landlord relationships (recommendation 2).

We are pleased to announce that the Royal Institution of Chartered Surveyors (RICS) has come forward to lead the development of this important code of practice, within its public interest remit.

RICS will develop the new code collaboratively, working with industry bodies including the TFA, Country Land and Business Association (CLA), National Farmers Union (NFU), the CAAV and the Agricultural Law Association (ALA).

This new code of practice will build on existing industry guidance which industry groups have recently created. These include:

• the CLA and TFA joint guidance (March 2022) on environmental schemes
• the TRIG Code of Good Practice for projects, schemes, or works requiring landlord consent in agricultural tenancies (2021)

These provide practical steps that tenants, landlords and their advisers can take for a positive and practical approach to agreeing variations to agricultural tenancy agreements. They support tenants to diversify and enter into our farming schemes.

We will also continue to work with industry through the new Farm Tenancy Forum, to monitor the effectiveness and uptake of these codes of practice.

Land agents

In relation to the Review’s recommendation to deliver more oversight of land agent behaviour and consider regulation of land agents (recommendation 3), we intend to:

• work with industry to implement the Review’s recommendation that a new code of practice is developed, setting out expected standards of behaviour of land agents, other professionals and landlords and tenants working in the sector
• work with professional bodies and tenant farming organisations to raise awareness of how tenants can use current complaints procedures through professional sector trade bodies to raise concerns about a land agent’s behaviour or bad practice
• discuss ways of highlighting and discouraging bad practice where that exists with the new Farm Tenancy Forum

As recommended by the Review (recommendation 4), Defra and the Department for Levelling Up, Housing and Communities (DLUHC) are working together on the reform of RICS and the relevant clauses in the Levelling Up and Regeneration Bill.

It is important to highlight that RICS has accepted Lord Bichard’s recommendations on its purpose, governance, and strategy. RICS is in the process of implementing these recommendations, including:

• improvements to their governance structures

• delivering greater independence of their regulatory functions

• re-focusing on their public interest remit

This matters for tenant farmers because these changes are important to ensure that the institution’s role in setting professional standards for agricultural dispute resolution are independent, fair and robust.

In cases where a tenant feels that their landlord’s land agent is unreasonably refusing consent to diversify or enter a scheme they should:

• raise the issue directly with their landlord to ensure the landlord is aware of the issue

• signpost the landlord and their land agent to the industry agreed codes of good practice published by TRIG, and the joint TFA and CLA guidance on agreeing diversifications and entering environmental schemes – this may help to open dialogue

• suggest to their landlord that they agree to undertake professional mediation on the issue through one of the professional organisations that provide that service such as the CAAV, RICS or the ALA, which may help to resolve a potential dispute more cost effectively and quickly than formal dispute resolution procedures

Diversification in Farm Business Tenancies (FBTs)

All farmers need to be able to access opportunities to invest in their farm business and the natural environment. There must be fair and balanced protection for both parties so that:

• tenants have access to those opportunities

• landlords have confidence in the letting sector to ensure there are opportunities for tenants and new entrants to rent land

The Review found that in some cases, tenancy agreements can include restrictive clauses that may be a barrier to the tenant’s ability to diversify.

FBTs have processes in place so that tenants can, at the start of an agreement, agree what diversification is appropriate. However, although this mechanism exists, we agree with the Review that in practice this flexibility may not be being used as widely and effectively as it could be.

We will work with the new Farm Tenancy Forum to examine how to encourage tenants, landlords and land agents to make wider use of the flexibility to agree diversifications as part of FBT agreements.

We previously examined restrictive clauses being a barrier to tenants accessing schemes through our consultation on Reforming Agricultural Tenancies in England. At that time, responses indicated that restrictive clauses were more of a barrier in the older Agricultural Holdings Act tenancy agreements (as those were agreed many years ago) than for the more modern FBT agreements.

This is because FBTs have been negotiated within the context of environmental schemes being available. They are reviewed more regularly, giving tenants the opportunity to renegotiate terms if necessary. For example, to diversify or enter environmental schemes.

We recognise that the context has changed since our 2019 consultation and we want to tackle any contractual inflexibilities holding farmers back. We will commit to gathering further evidence with the new Farm Tenancy Forum on:

• whether restrictions in FBT agreements are creating more of a barrier now for tenants than in 2019

• whether changes are needed to support FB tenants and landlords

• how we can encourage the sector to use the flexibilities that the FBT framework offers

Recognising both the pressures on the natural environment arising from nutrient pollution from agricultural processes, and the current high costs of inorganic fertilisers, the government is supportive of tenant farmers diversifying their businesses to generate income from animal manures and slurries.

Tenancy agreements should not prevent tenants from moving this nutrient-rich waste off their land for the purposes of, for example, suppling alternative fertiliser manufacture or feedstock for an anaerobic digestion facility.

Defra consultation on tenancy reform

Defra undertook a consultation on tenancy reform in 2019. It then delivered legislative changes through the Agriculture Act 2020. These changes mainly focused on modernising the older (life-time secure) Agricultural Holdings Act (AHA) tenancies.

In 2019, many stakeholders felt that reform of FBTs was not necessary. This was because they are modern commercial agreements with enough flexibilities in the existing FBT legislative framework.

The Review recommends a new consultation on:

• ways to encourage more longer-term tenancies

• better use of the FBT framework

• updating the definition of agriculture and good husbandry

• an extension of the duration of FBTs

• enabling dispute resolution procedures for tenants for a landlord’s unreasonable refusal of consent (recommendations 6 to 8 and 64)

We agree with the Review that these may now need further examination. However, timing is key. As we move through the agricultural transition it will be important to keep the discussion and analysis active. As evidence emerges on how the sector responds, we are in a better and more informed position to consider what reforms are necessary.

We will continue to work with the new Farm Tenancy Forum on the legislative and non-legislative solutions identified by the Review. We will keep the need to consult or legislate, or both, under review.

In line with the Review’s recommendations, we would be open to underpinning any future consultation or legislation change with a Law Commission review of agricultural tenancy legislation, if appropriate and beneficial to do so (recommendation 65).

Encouraging longer-term tenancies

In relation to encouraging longer-term tenancies, Defra recognises that they can provide the security that many tenants need to invest and grow their business and, in some cases, to deliver environmental goals.

However, the Review also recognises that there are legitimate reasons for shorter tenancies, such as flexibility and for land used on a rotational basis to accommodate high-value specialist crops.

Short-term tenancies may also be more appropriate for some new entrants looking to rent land on a short-term basis to gain experience without committing to long term risks. This is why they were introduced, in response to requests and feedback from the sector at the time. 

To encourage more longer-term tenancies, the Review recommends the government restrict agricultural property relief from IHT to tenancies of at least 8 or more years.

At Budget 2023, the government announced a consultation on agricultural property relief and ELM which will explore this recommendation in more detail. The consultation also considers how me might deliver the Review’s recommendation to identify and define any exclusions to this rule in legislation.

Defra will work together with the new Farm Tenancy Forum to explore ways to support longer-term tenancy agreements where beneficial for the tenant and landlord. We also want to retain the flexibility that FBTs provide and maintain landlord confidence in the let sector.  

Since publication of the Review, we have set out the detail of what we will pay for and what the payment rates will be in the ELM update. This includes a section on tenants and how they can best interact with schemes. This will provide more certainty and encouragement for landlords and tenants to enter into longer term tenancy agreements.

Tenant farming commissioner

To help provide more oversight of standards of behaviour in the tenanted sector, the Review recommends that Defra should examine the appointment of an independent central ombudsman or Tenant Farming Commissioner (recommendation 5).

It suggests that an independent commissioner could help to ensure fairness in the sector and examine instances where codes of practice are not being followed.

Since the Review’s publication, we have received feedback from industry organisations with differing views on the proposal.

To explore this issue in more detail, we will launch a call for evidence this summer on the proposal for a Tenant Farming Commissioner in England. This will examine the benefits and impacts of how a Tenant Farming Commissioner might work in practice and fit within existing procedures and regulations.

Embedding the tenant sector in Defra

We recognise the importance of embedding tenants and their needs across all farming schemes and Defra initiatives.

The Review makes several recommendations for how best to do this in Defra, which this section covers.

Organisational structure

As the Review highlights, the views of tenants should be heard through policy development and through organisational structures across the department.

We agree with the need for representation of tenancy issues at ministerial and director level (recommendation 72).

The Minister for Food, Farming and Fisheries includes tenants as part of his portfolio. The Director for Agri-Food Chain has strategic responsibility for tenants. The Director for the Farming and Countryside Programme is responsible for making sure the policies and schemes within the farming reform programmes work for tenants.

All other relevant directors will need to account for tenancy and tenants in scheme design and wider policy across Defra.

We welcome the recommendation that relevant Defra staff receive training on specific tenancy issues (recommendation 69).

As part of upskilling and training, we will develop a series of teach-ins from industry experts on agricultural tenancy issues for Defra staff. We agree that as part of their induction into relevant parts of Defra, officials should be upskilled in land tenancy issues. We will ensure the Farming and Countryside Programme induction includes that.

We agree that it is important to provide a regular update of progress against the commitments made in this response (recommendation 74). We will reference the Review, as appropriate, in announcements and maintain an ongoing dialogue with industry through our discussions with the new Farm Tenancy Forum.

A focus on different groups, including tenants, is part of our programme monitoring and evaluation to understand impacts within farming (recommendation 68). This will help us to better develop schemes that are attractive and accessible for tenants.

The Review welcomes the commitment made in the Government’s food strategy to publish a Land Use Framework in 2023. We agree to analyse the impact of the framework on tenant farmers and commit to integrating tenancy considerations throughout the process (recommendation 73).

Data

We agree the importance of having a clear understanding of how our policies, schemes, and services work for tenants. Data allows better insight into how we can adapt our service design and delivery to suit all stakeholders’ requirements, including tenant farms.

To further embed tenancy considerations into Defra policy development, the Review recommends collecting more specific data on tenants and how they interact with our schemes (recommendation 75).

The best and most cost-effective way to do this is to collect and use relevant data from existing surveys and statistics. Data from other industry sources, such as the Annual Agricultural Land Occupation Surveys for Great Britain will also inform policy development.

We also collect data on different groups across farming, including farm holdings with tenancies, as part of our Farmer Opinion Tracker. This measures how farmers are responding to new schemes and policies. Here, data is broken down into owned, tenanted, and mixed land, so we can observe trends and embed any learning back into policy development.

We will keep this question under review as part of our monitoring, evaluation and learning work. It will ensure we have the necessary evidence to inform policy review and development.

Stakeholder engagement

Farmers and land managers are at the heart of our policy and scheme development.

To effectively develop and test schemes with farmers, we use a range of methods:

• social science research

• user-centred design and research

• co-design

• engagement with farmers and practitioners

• working with stakeholder organisations and other experts

The TFA is part of the Farming Senior Stakeholder Group. It meets regularly with the Minister for Farming and the Director of the Farming and Countryside Programme.

Through our co-design work or piloting schemes, we engage with a representative group of farmers, including about land tenure. In this way, our schemes are accessible, attractive, and fit for purpose.

We have a consistent process in place for developing the more novel elements of schemes in partnership with famers – test and trials. Test and trials help us to work with a range of farmers, including tenants and land managers to co-design new schemes. These help us to understand how the schemes work in a real-life environment and what issues we need to consider in more detail.

We have 15 test and trials working with tenant farmers:

• 9 are providing evidence on issues concerning landlords and tenants

• 10 are working with landlords and tenants more generally

As part of the TWG, some of our tests and trial participants submitted written evidence on the barriers they are experiencing with tenant farmers accessing schemes or any other issues. This supported the development of some of the Review’s recommendations.

You can also read the government response to each Rock Review recommendation.