To reset relations with the agricultural community, the UK government is set to introduce a “new deal” for farmers. This initiative comes after widespread protests following agricultural inheritance tax changes and the reformation of the EU-derived subsidy scheme.
Environment Secretary Steve Reed is expected to announce the deal at the Oxford Farming Conference, focusing on enhancing the profitability and sustainability of farm businesses.
Reed aims to ensure fairer payments for farmers, reducing their dependency on subsidies. Under the EU’s Common Agricultural Policy, farmers were paid a flat rate per acre to maintain low food prices.
Now, England’s revised scheme will phase out these payments, shifting to incentives for environmental restoration and protection. Meanwhile, devolved administrations will continue with their own subsidy systems.
The current allocation for farming payments in England stands at £5 billion over two years. However, a review of these schemes is planned for the 2025-26 budget period. Research highlights the financial strain on farmers, who receive merely 1 penny per loaf of bread or block of cheese sold.
Addressing this issue without increasing food prices or imposing strict regulations on supply chains presents a challenge. Critics argue that UK consumers pay too little for food, with only a few countries, like the US, spending a lower proportion of their income on food.
The low income from farming complicates the government’s plans to tackle inheritance tax avoidance. Starting in 2026, farms valued over £1 million will face a 20% inheritance tax, spread over a decade.
Given the modest returns on farm assets, these payments could consume the entire income of many farms, as per the National Farmers’ Union.
A 2024 survey by Riverford revealed that 64% of British fruit and vegetable farmers felt financially at risk, up from 49% in 2023. Despite the uproar over tax reforms, Reed will not propose changes to the policy but will concentrate on boosting long-term farm profitability.
New Frameworks and Food Strategy Underway
The government is phasing out the EU’s flat payment system, with significant cuts planned for the 2025-26 tax year. For instance, a £40,000 payment would shrink to £7,200 after a 76% reduction in the first £30,000.
Updates are expected regarding the timeline for a land use framework to prioritize farming and nature. Additionally, a new food strategy is in development to bolster the UK’s food security against climate shocks.
Nature advocates emphasize the critical impact of climate change on farming. The new nature-friendly payments scheme is seen as vital for biodiversity enhancement.
According to the Energy and Climate Intelligence Unit, the past year saw over 1,000 flood warnings across England’s prime farmland and the second poorest harvest on record, resulting in a £600 million revenue drop compared to 2023.
Barnaby Coupe of the Wildlife Trusts underscored the urgency of establishing a clear future for nature-friendly farming schemes. “The ambitions of too many farmers are being stifled by a lack of certainty about what actions will be available to them, and when they will be able to access payments,” Coupe stated.
As such, the government is expected to release a farming roadmap in early 2025, which is anticipated to provide a stable, long-term plan to assist farmers in transitioning to sustainable and climate-adapted practices.
READ ALSO: Constitutional Framework: Former Chief Justice Recalls for a Constitutional Review
