Category: Policy & Business

On the 18th February representatives of the NFU, CLA, TFA and CAAV met with Treasury and Defra Ministers to discuss the changes to Inheritance Tax reliefs announced in the Budget (see https://abcbooks.co.uk/budget-autumn-2024/).   This is the first face-to-face meeting between farming interests and the Government on the matter.  It seems fair to say it did not go well.  George Dunn of the TFA described it as ‘one of the most unproductive meetings I’ve had in the 20 years, and that’s no exaggeration‘.  Alternatives to the Government’s proposals were presented but the Treasury reportedly showed no interest in discussing them.  The line taken was that all options had been explored before the Budget and the current plans were the best policy.  It therefore seems that the Government is doubling-down on its plans.  The farming sector is likely to continue to protest but it currently appears as if the changes in Agricultural Property Relief are likely to be introduced in April 2026.  The advice is still to wait for draft legislation to be published (probably in the summer) before making any business changes as the devil is often in the detail.  However, with no revision in the plans looking likely, landowners may wish to think a little harder about their sucession plans.   

Readers may recall back in June 2023 Defra appointed 48 ‘Responsible Authorities’ (typically County Councils see https://www.gov.uk/government/publications/local-nature-recovery-strategies-areas-and-responsible-authorities), to lead the development of Local Nature Recovery Strategies (LNRSs) across England.  The first LNRSs, in the West of England have been completed, but for the majority there is still time to get involved.  Each Responsible Authority is working with Government agencies such as Natural England, the Environment Agency and the Forestry Commission. They are also engaging with local communities and farming groups, including the Country Land and Business Association (CLA) and the National Farmers Union (NFU), to develop their LNRSs.

Local Nature Recovery Strategies include a written document and a map designed to enhance biodiversity and restore nature at the local level in England.  Each will identify existing important habitats and will set out local priorities for restoring nature together with proposals for actions on how to achieve this.  LNRSs are part of the UK’s commitment to reversing biodiversity loss and are mandated by the Environment Act 2021.

Importantly, LNRSs will not require landowners to change how they use their land or restrict the use of it, but they should help identify which environmental land activities are most appropriate for their land and if there are opportunities for working with other land managers on a landscape-scale level.  In future, LNRSs will help Government when considering applications for funding specific nature recovery activities, by acting as criteria in applications for some schemes.  LNRSs will also guide and incentivise landowners to create or enhance habitats for biodiversity net gain (BNG).  For more information go to https://www.gov.uk/government/publications/local-nature-recovery-strategies/local-nature-recovery-strategies

Farming Equipment and Technology Fund (FETF)

The Rural Payments Agency (RPA) has changed its payment terms for claims to the FETF.  Previously guidance stated ‘The RPA will aim to pay your claim within 30 working days of receiving it or within the published timescales for the claim submission window’.  This has now been revised to ‘We aim to pay your claim by 20th June 2025 provided all claim evidence has been received‘.  Rather unhelpfully, as it refers to the 2024 scheme, i.e. to items already purchased and claimed for, it goes on to say ‘You may need to account for this if it will affect the cash flow of your business.’

The FETF provides funding for ‘smaller’ capital items, selected from a pre-defined list, however, these can still be sizeable, with grants of upto £50,000 towards productivity and slurry items and up to £25,000 towards animal health and welfare items.  The FETF opened back in March/April 2024 with Agreements requiring acceptance by 8th July and the last date for claiming payment 10th January 2025.  For some, therefore, not being paid until June will be a long period of time.  This seems like another last-minute, no-consultation change in rules for the schemes and will be a further blow to farmers’ confidence in funding going forward.

‘Land Management’ Capital Grants

In perhaps, more promising news, Defra appears to have been updating its guidance for capital grants which were previously known as CS capital grants.  These were suddenly closed to new applications back in November.  For many of the grants the update is described as ‘General Improvement for Clarity’.  Although there is no confirmation the scheme will re-open and no date, it would seem a little pointless to update the guidance if Defra was not planning on opening it again?  We will endeavour to keep readers up to date.

Defra has opened a new scheme to help use surplus and waste food.  Food distribution charities can apply to a new £15m scheme – Tackling Food Surplus at the Farm Gate scheme.  The funds can be used to purchase such things as new packaging and labelling equipment, vehicles to move food from farms to a redistribution organisation and also for equipment such as fridges and freezers to allow food to be stored for longer.  Applications will also need to outline how they will form relationships with farmers to get access to surplus food and also how they will increase their capacity to redistribute this food to communities.  Applications can be made online via https://atamis-9529.my.site.com/s/Welcome and must be submitted by 13th March 2025.

Speaking at the NFU Scotland annual conference, First Minister John Swinney set out what he called a ‘New Deal’ for Scottish Agriculture.  This seems a somewhat grandiose title for a fairly modest set of policy announcements.

The main points are;

• an extra £20m of capital funding this year.  Of this, £14m will go into a new Future Farming Investment Scheme providing flexible capital grants.  This will support efficiency, nature and climate friendly farming.  No details are yet available on the scheme – details are to be consulted on.  Mr Swinney outlined that it will ‘not be prescriptive’.  The £20m extra will be followed by another £26m of funding next year.  This £46m ‘returns’ funds previously taken from the agricultural budget.  This additional money had already been promised in the Scottish Budget (see https://abcbooks.co.uk/scottish-budget-3/). 
• an additional £7 million in 2025 through the Agri-environment climate scheme (AECS)
• hosting a new entrant’s summit bringing key individuals together to find solutions to attract more people into farming
• a three year programme of national land Lidar laser scanning to accurately map terrain
• £75,000 for the RSABI to rovide mental health support for farmers and crofters
• a commitment to delivering ultra-high frequency (UHF) electronic identification for cows to improve traceability
• further details of how the routemap to implementing a new framework of agriculture support will work.

On the final point, there have been no further details published at the time of writing.  There are rumours that the intended start date for implementation may be pushed back a year from 2026 so that it is after the May 2026 Scottish Parliament elections.    

Full details of the speech can be found at – https://www.gov.scot/news/new-deal-for-agriculture/ .

The much-delayed Land Use Framework was unveiled on Friday 31st January.  Originally due to be published under the previous Government, it has been pushed back a number of times.  What has now been announced is a consultation on the Framework, which will last for 12 weeks.  The Framework applies to England only, although the Government says it wants to work closely with the devolved administrations.

The Government is at pains to point out that the Framework is not going to be ‘prescriptive’ – i.e. you must use this piece of land for this purpose.  What has captured a lot of attention though, is Defra’s own analysis of the type of land use change it foresees.  It states that this is  a ‘balanced approach to meeting our range of priorities‘ including the Environment Act and Climate Change targets.  The categories outlined are;

1. Land Management Change – standard changes in the way land is farmed – e.g. crop rotations etc. including planting of cover crops – seen as outside the scope of the Framework

2. Small Changes Maintaining the Same General Land Use – more nature in fields but alongside food production – e.g. field margins, buffer strips – overall loss of 1% of agricultural land area (50,000 Ha) by 2050

3.1. Changes to Combine Food Production and Environmental / Climate Benefits – mainly incorporating more trees alongside food production – overall loss of 4% of agricultural land area (370,000 Ha) by 2050

3.2. Changes for Environmental and Climate Benefits with Limited Food Production – e.g. creation of species-rich grassland; management of peat; short rotation coppice – overall loss of 5% of agricultural land area (430,000 Ha) by 2050

4. Land out of Food Production into Environment and Climate Uses – land use becomes non-agricultural – e.g. re-wetting of peat; creation of woodland; creation / restoration of coastal and lowland heath – overall loss of 9% of agricultural land area (760,000 Ha) by 2050

Media reporting has tended to focus on Category 4 and report that Defra aims to see 9% of farmland come out of agriculture over the next 25 years.  However, it can be seen that other categories, especially 3.2, severely limit productive farming.  The overall loss might be nearer 15% therefore.

In terms of food production, Defra states ‘The Government is committed to maintaining food production. Our assessment is that, based on historical trends of productivity improvement, and supported by new and emerging innovations, the impact of these land use changes on domestic food production will be offset by productivity improvements’.  This seems a bit of a stretch perhaps.  If it were only the least productive land that was going to environmental uses then it might make sense.  However, the references to peatland (some of our most productive lowland soils) shows that the trade-offs are more difficult than that.  

The consultation also addresses the issue of loss of farmland to development.  It calculates that if the Government’s target of 1.5 million new homes in England by the end of this Parliament in 2029 is met (a big ‘if’) this would entail building on just 30,000 Ha of ‘greenfield’ land.

The consultation asks for comments and there will also be a series of regional workshops.  The aim is to publish the final Framework in July (although the timing is subject to change).  Once complete, the Framework will include;
1. The principles that Government will apply to policy with land use implications
2. A description of how policy levers will develop and adapt to support land use change
3. A release of land use data and analysis to support public and private sector innovation in spatial decision making, and the development of tools to support land managers in practice.

All this will interact with various other Government policies such as the 25-Year Farming Roadmap, the Food Strategy, Environmental Improvement Plan review, Industrial Strategy, long-term Housing Strategy, Transport Strategy, National Infrastructure Strategy, Strategic Spatial Energy Plan etc. etc.

As can be seen, nothing in the Framework involves any element of compulsion.  Land is owned privately, so it will continue to be up to each individual owner to do what they want with their land (within the law).  To incentivise the level of change Defra is suggesting will require a lot of funding.  It is currently unclear where this will come from.  The Government itself is short of funds.  There is hope that private nature markets may grow over time – but their development has been slow so far.  

The largest impact of the Framework may be through the Planning system.  The data and tools that feature prominently in the announcement could increasingly influence whether Planning Permission is granted.   

For the full consultation go to – https://www.gov.uk/government/consultations/land-use-in-england

The latest agricultural rents data from Defra shows a mixed picture.  The ‘All Farms’ rent for Full Agricultural Tenancy (FAT) (i.e. Agricultural Holdings Act (AHA) agreements) in 2023/24 has increased by 5% from the previous year to £180 per hectare (£73 per acre).  This is driven mainly by an increase in rents for Cereals Farms, increasing by 7% on the year to £235 per hectare (£95 per acre).  For Farm Business Tenancy (FBT) agreements, average rent rose by 3% to £229 per hectare (£93/ per acre).  Again, Cereals farms had the largest percentage increase, rising by 8%.

However, all the rents shown are at current prices.  After adjusting for inflation, Cereals farms on Full Agricultural Tenancy agreements, experienced a real terms decrease of 1% at the farm level.  And in real terms, the average FBT rent fell by 3%, with only Cereal farms seeing an increase.

For all farm types, except (interestingly) Lowland Cattle and Sheep farms, FBT rents are higher that AHA.  The table below shows a summary of the last three years.

Defra’s Farm Rents publication uses data from the Farm Business Survey.  Due to the time taken to collect the data, it is somewhat historic.  The figures just published are for the 2023/24 year – March to February (shown as ‘2023’ in the table below).  The full statistical notice can be found at https://www.gov.uk/government/statistics/farm-rents/a7055667-5631-4172-a03d-7602db63904e

The Government is likley to miss its legally-binding environmental targets.  This is the finding of the latest annual assessment by the Office for Environmental Protection (OEP) – the Government’s independent environmental watchddog.  Various statutory targets are set out in the Environmental Improvement Plan (EIP) and elsewhere.  Of the 43 environmental targets identified, the OEP found that the Government is largely on track to achieve nine, partially on track to achieve twelve and largely off track to achieve 20.  The report goes on to state that, with key deadlines approaching, the window of opportunity to achieve the benchmarks is rapidly closing.  More details on the report can be found at – https://www.theoep.org.uk/report/government-has-chance-get-track-meet-legal-environmental-commitments-window-opportunity. 

Landowners could be faced with lower levels of compensation if they lose land to compulsory purchase.  The Government launched a consultation on 19th December (see https://www.gov.uk/government/consultations/compulsory-purchase-process-and-compensation-reforms/compulsory-purchase-process-and-compensation-reforms).  Where land is being compulsorily purchased for social or affordable housing, or for educational and NHS purposes, the proposals suggest that the landowner should only be compensated on the basis of existing use (i.e. agricultural value) .  Any ‘hope’ value – the uplift in price due to the fact that the land’s location makes it likely to be sold for development – would be discounted.  Thus landowners might be paid relatively little for prime development land.

 

The Government has re-committed itself to produce a ’25-Year Roadmap’ for English farming.  The idea was first raised by Defra Secretary, Steve Reed, at the CLA Conference before Christmas.  It was repeated when Mr Reed spoke at the Oxford Farming Conference in early January.

It is not totally clear what the Roadmap will encompass.  It is due to be published later this year and the idea is that ‘Government and farmers will work together to identify solutions to challenges, and ensure government support is in place to enable farmers to take the actions that will let their businesses succeed‘.  There is also the question of how the Roadmap will interact with the National Food Strategy.  This was also announced by Mr Reed in December.  It will be focused on four key areas of Food Security, Health, Environment, and Economy.  The Strategy is due to be published in the ‘first half of 2025’.  Although the Strategy is for England only, Defra promises it will consult with the devolved administrations to ensure a joined-up approach.

The Roadmap seems designed to get the farming industry back ‘on board’ and provide reassurance that it is being listened to.  Particularly after the Budget announcements – not just on Inheritance tax, but the cut in BPS for 2025, and employment cost changes.  However, it was notable that Mr Reed did not bring any major policy announcements to the conference as a ‘sweetener’ – as has been seen in the past.  The messaging from the Government seems to becomming clearer, in that it sees farming as a business, but just like any other business.  Therefore, as a sector, it shouldn’t expect special treatment.    

For more details on the announcement see – https://www.gov.uk/government/news/government-announces-reforms-to-boost-profits-for-farmers-with-a-cast-iron-commitment-to-food-production.