The rollout of new payment schemes for farmers is causing “widespread uncertainty and risks” for the sector, the National Audit Office has warned.

The Farming and Countryside Programme aims to transition the UK’s agriculture sector post-Brexit to ensure profitable farms, food security and environmental health by 2028.

Under the scheme, Defra is phasing out EU direct payments to farmers, which were based on land area, and replacing them with agri-environment schemes, based on delivering environmental outcomes alongside food production, such as the Sustainable Farming Incentive (SFI).

The changes have come at a time when extreme weather, market conditions and sudden rises in input costs are putting farms under immense pressure.

Defra has been taking an iterative approach, making changes and improvements to the new subsidy schemes over time.

But the National Audit Office (NOA) released a 56-page report on Tuesday warning that chopping and changing has made it difficult for farmers to plan their businesses to remain viable, produce food and achieve the programme’s environmental goals.

The spending watchdog said the take-up of the new schemes is rapidly increasing with 40,700 farmers signing up as of April 2024.

Farmer satisfaction with the SFI has also improved over time and Defra achieved a “step-change” in the speed of processing applications from several months to an average of eight days, the report said.

However, the department has failed to build farmer confidence, with just 35 per cent saying they trust the department’s ability to deliver change, according to its findings.

Almost half (48 per cent) said they are not at all positive about their future in farming, the report warned.

Defra has not yet provided a long-term view of how it expects the programme to develop, such as the balance of funding between different payment schemes.

The NOA outlined concerns that unconstrained demand for the SFI, which pays farmers for basic actions to manage their land in a more environmentally friendly way, could “crowd out” funding for more ambitious, complex schemes like Country Stewardship, which pays farmers for specialist, bespoke actions.

The report said: “Some stakeholders told us that farmers’ uncertainty over how schemes will develop and Defra’s caution over sharing information, in areas such as land-use change and the impact on food production and farm viability, are undermining trust.”

While some improvements have already been seen as farmers adapt to life without direct payments, the NOA said the evidence is “inconclusive” on whether the scale of change needed for the UK agriculture sector will be achieved by 2028.

The report explored whether the Farming and Countryside Programme, which has a £12bn budget over a period between 2020 to 2025, is providing value for money.

It concluded that gaps in the scheme’s data on environmental outcomes “is limiting Defra’s ability to fully understand the impact on the environment, or whether it is on track to achieve value for money”.

The watchdog’s recommendations to Defra included actions like completing work to strengthen the programme’s environmental goals, developing a comprehensive package of advice for farmers and increasing the level of transparency to stakeholders.

Farming minister Daniel Zeichner said the new Government will “restore stability and confidence amongst farmers”.

“We will optimise schemes and grants in an orderly way, ensuring they produce the right outcomes for all farmers while delivering food security and nature recovery in a just and equitable way.

“Government will go further by introducing a new deal for farmers to boost Britain’s food security, restore nature and support rural economic growth. We will protect farmers from being undercut in trade deals, make the supply chain work more fairly, protect from shock rises in bills by switching on GB Energy and use the government’s purchasing power to back British produce.”