No immediate cut to the Farming Budget
In the months leading up to the Budget, speculation of public spending cuts for Defra was rife. Many people reported that, as part of addressing the “£22bn black hole” in public finances, the farming budget could face a £100m cut taken from the Environmental Land Management budget (ELMs). These reports generated outcry, with key organisations highlighting not only the initial successes of ELMs, but the imperative need to increase funding through ELMs to ensure that targets for restoring nature and climate change mitigation and thereby our long-term ability to produce food, are met. Importantly this cut has not materialised. For the first year (2024-2025) the government will keep the farming budget the same at £2.4 billion. Whilst this can be seen as a cut in real terms (in that no increase to match inflation has been accounted for) no direct reduction has emerged.
However, this is only a year-long commitment, with the intention to review the ‘affordability’ of these schemes as well as support for flood defences. Whilst this is not underpromising – it still leaves the potential of an increase – it could simply be cut the following year instead. Those celebrating this do so from the slightly reductive baseline that it could have been a lot worse.
Funding for Nature
Defra Secretary Steve Reed’s statement outlined that they expect ELMs to remain the main lever for nature recovery across England, whilst pointing to the role of nature markets in filling any potential funding shortfall, nodding to Biodiversity Net Gain (BNG) in particular. Unfortunately, this did not come with any clarity as to how BNG will be scaled up and improved for demonstrable positive outcomes for nature. Any faith in private market mechanisms needs to come with a concerted plan to develop them at the speed and scale required.
There were some important pledges in the budget, however. £400m has been made available for nature recovery, specifically tree planting and peat and soils, alongside an immediately available £60 million for farmers affected by flooding. Similarly £2.4bn has been promised for improving resilience to flooding and flood defences, with the intent to reduce damage from extreme weather.
Changes to Agricultural Property Relief
The farming sector responded with great concern to the expected changes to Agricultural Property Relief (APR) on inheritance tax. Arguments that this would ‘kill’ British farming come from a fear that this would penalise small family farms operating on already fine margins, with an inheritance tax of 20% ultimately putting them out of business and clearing the way for larger conglomerates and agribusinesses who can absorb such costs through economy of scale. This announcement has generated serious controversy, and it is important to note both sides of the argument: some analysis shows the expected impact to be lower than feared, once factors like the spouse and property exemptions are taken into account. Those bearing the biggest tax burden, in theory, will be large estates. Nonetheless, smaller farm businesses operating on little to no profit are likely to be driven to sell land to generate income for such a tax, likely making their businesses yet more unviable.
Not only does this represent a clear threat to smaller scale agriculture, but is likely to hinder progress toward nature friendly farming. Over the long term, this has the potential to produce a “get big or get out” mentality widely seen across farming in the US, where intensification, scaling up and the correlative focus on synthetic inputs with high outputs are the likely outcome of trying to compete with bigger businesses, or even turn a profit. Assuming the impacts of APR changing are as drastic as some fear, without careful thought and mediation, this could actively hinder the environmental transition that Labour seek to support.
Arguments around APR are often focussed on the question of affordability, but as Sue Pritchard of the FFCC highlighted recently, the broader question here is one of trust. Ever since leaving the European Union, agriculture has faced consistent uncertainty as it navigates a seriously complex transition in policy, funding and practice. All this, whilst shouldering a growing expectation from the public and government to produce food whilst mitigating the impacts of climate change and biodiversity loss, while bearing the major risk and costs associated with such change and volatility. In short, Agriculture requires consistency, honesty and trust in order to remain stable in its biggest transition in over 70 years.
Ultimately, we need to focus on the greater question of how government and farming can work together to achieve the fast approaching climate and biodiversity targets of 2030 whilst making farming viable in the long term. A dialogue of trust, simplification and consistency will be key here. Given that over 70% of England’s land is agricultural, ensuring that farmers are empowered as agents of change, funded and meaningfully valued as drivers of climate change resilience, sustainable food production and nature recovery must be Defra’s driving focus.
