Sustainable Farming Scheme: introduction to business case

The final version of the business case, integrated impact assessment and associated evidence for the Sustainable Farming Scheme (SFS) was completed in July 2025. This evidence has been used to support and inform Welsh Ministers’ decisions on the planned introduction of the scheme. These documents have been published to both disseminate the assembled evidence and to ensure a transparent process. 

The business case sets out the policy objectives and rationale(s) for intervention in the agricultural sector in Wales, noting in particular the presence of social benefits and costs associated with agricultural activity and the arguments of how the Welsh Government should support farmers within the context of achieving sustainable land management (SLM) objectives. To address such issues, with the aim of maximising the benefits and look to mitigate the costs, options were identified and considered. The retained options were subject to more detailed assessment with focus on the preferred way forward. 

The SFS will provide a maximum of £238m of public funding through the universal layers of the scheme and at least £102m to the optional and collaborative layers to support Welsh farmers in 2026. The budget and structure were set to support early take-up of the scheme. It is recognised that the scheme will need to evolve in future years to increase social returns through more optional and collaborative actions. 

The business case develops the value for money case for the SFS, including the effects of some key design and funding allocation choices, including the payment methodology and rates, alongside the anticipated benefits of seeking to support early and substantive uptake of the scheme and, in particular the optional and collaborative actions. Despite this, from its inception, the scheme is expected to provide more socially desirable outcomes than continuing with the existing one.

The analysis presented reflects the use of complementary modelling and analysis using farm-level financial and other land use and environmental datasets but does not present the actual value and final distribution of payments at an individual farm level. The value of individual farm payments will depend on several factors including farm-specific characteristics and the take-up of available optional and collaborative actions.  

The SFS payment rates have also been designed within the overall structure of the business case to seek to provide some mitigation of negative distributional impacts. In particular, the whole farm payment £70 per hectare for the first 70 hectares of eligible land, and then £2 per hectare for all remaining eligible land. In addition, the capping that will be applied to higher value SFS universal payments. Finally, the stability payment of £1,000 available in 2026 for farms up to 100ha is intended to recognise particular transitional challenges and uncertainties that some farms are expected to face. It is intended to support small to medium, often traditional family farms, least able to quickly respond to the requirements of the new scheme and for whom the costs of the scheme are expected to be, on average, proportionately greatest. 

The move from the current agricultural support arrangements to the SFS involves some significant change, and there are notable uncertainties regarding the potential impacts given the different characteristics and decision-making choices of individual farms, and how they may choose to implement relevant adjustments. The business case seeks to provide a proportionate and balanced assessment of the best available evidence and information at the time. However, we recognise that there remain areas where further development of the evidence is required. As a result, we are putting in place a comprehensive monitoring, reporting and evaluation programme to ensure that we fully understand the full range of effects and outcomes from the outset and are able to quickly respond to make scheme adjustments with a view to improving the value for money over time.  

As part of the transparent use of evidence, we have also published an updated assessment by a consortium led by ADAS which estimates the potential farm-level economic impact of the final scheme and payment rates. Estimating such impacts is subject to some challenges, and there remain some particular uncertainties in relation to effects on, for example, labour utilisation and adjustments, with further evidence beyond economic models being important given potential variation in the response of individual farms. In practice, such decisions might also reflect prevailing agricultural market conditions and other specific farm opportunities. We are already planning to further develop the evidence base covering the various dimensions of the potential impact of the SFS to run in line with the roll-out of the scheme. This includes farm level evidence as well as seeking to better understand the downstream impacts on the supply chain, and to clearly identify the additional, attributable environmental impacts delivered.