The future of farming

Ministers have taken on responsibility for farming policy in difficult economic and geopolitical circumstances, and we welcome their strong commitments to back British produce, protect farmers in trade deals and improve fairness in the food supply chain. We welcome the increased scrutiny of farming policy in Parliament, and we are encouraged by Defra’s plans to publish a 25-year Farming Roadmap, Land Use Framework and Food Strategy. We also welcome the recently announced review into farming profitability, led by Baroness Batters. We are particularly pleased to see food security recognised as one of Defra’s core priorities, and we look forward to scrutinising the conclusions and implementation of the forthcoming profitability review. (Conclusion, Paragraph 10)

The Government has made several significant farming policy announcements or sector interventions since the election. This is an impressive list of initiatives that the Defra Secretary has recognised should be part of an ‘interlocking jigsaw’. We are concerned, however, that certain high-profile policies have been announced prior to the completion and publication of the strategies and reviews Defra says will inform and guide its vision. This has caused considerable confusion and concern amongst farmers and agricultural business, the scale of these concerns being apparent in nationwide protests. In the absence of a vision and strategy, we have heard that Defra’s policy announcements appear disjointed and without consideration of their wider impact and potential implications. (Conclusion, Paragraph 11)

Farms are professional businesses and remain adaptable to change, but they must plan for changes well in advance with confidence about the future environment they will be operating in. We have concerns that the Department has not yet demonstrated that it is sufficiently alive to the urgency of setting out a clear direction for the sector nor has it fully considered or calculated the impact of recent policy decisions on morale, confidence and rural mental health. A clearer exposition of the Government’s vision and credible plans for implementation should be presented by Ministers and senior officials. (Conclusion, Paragraph 12) 31

The Government should urgently set out its vision for the farming sector, achieving food security and the future of the Farming and Countryside Programme in its proposed 25-year Farming Roadmap, and in advance of making significant major changes to farming policy and support mechanisms. The 25-year Farming Roadmap should bring together Defra farming policy and programmes into a single vision outlining how they will work together to achieve measurable outcomes for food security and the environment. This vision should set out a coherent and signposted plan for change and details of the risks posed and support available. (Recommendation, Paragraph 13) Farm funding and profitability

Farmers and the rural community are fundamental to delivering the Government’s plan for change. They provide high quality, nutritious food, deliver environmental goods and maintain landscapes for us all to enjoy. The Government has an exciting opportunity to shape the future of farming as we transition from legacy payments, and we agree that productivity gains will be a positive step towards self-sufficient farming businesses. Productivity grants, accessible and affordable advice and improving fairness in the food supply chain will be the key drivers to achieve this. We note positively that Baroness Batters has been appointed by Defra to lead a Farm Profitability Review. (Conclusion, Paragraph 26)

A transparent policy on the direction of the Environmental Land Management Schemes (ELMS) and other subsidy arrangements is crucial. If the Government is serious about improving ELMS outcomes it must consult with stakeholders and communicate its plan clearly. Confidence in the schemes must be urgently repaired to secure their future success. Closing the Sustainable Farming Incentive 2024 (SFI24) without notice has affected trust in the Government and has left many farmers without the funding they expected and at risk of becoming unviable in the period before the next scheme is introduced. (Conclusion, Paragraph 27)

An alternative funding mechanism should be put in place to fill the gap in funding for those who missed out on the SFI24, no later than September

The Government should set out what the next iteration of SFI will look like and the date it will be open for applications in the response to this report. It must also state how it intends to increase farm profitability, using a sector-by-sector approach, no later than October 2025. (Recommendation, Paragraph 29) 32 Taxation, consultation and evaluation

We support the Government’s objective of reforming Agricultural Property Relief (APR) and Business Property Relief (BPR) to close the loophole that encourages wealthy investors to buy agricultural land to avoid inheritance tax. We recognise longstanding concerns that these reliefs are being used by individuals to shelter wealth and are affecting the price and availability of land for new entrants. (Conclusion, Paragraph 46)

We are concerned, however, that no consultation, impact assessment, or affordability assessment was conducted before the announcement of the reforms. The lack of proper evaluation of the impact of these changes means that the scale and nature of its impact on family farms, land values, tenant farmers, food security and farmers in the devolved administrations is disputed and unclear and comes with a considerable risk of negative unintended consequences. As such, the reforms threaten to affect the most vulnerable, including those who are older or are farming less profitable or tenanted holdings. The real concerns of farmers are demonstrated in recent data on farmer confidence and mental health. (Conclusion, Paragraph 47)

Several alternatives to achieve the same goals, or mitigations to protect vulnerable farmers, have been proposed. We are not in a position to assess the merits of each and propose an alternative, but there is sufficient time between now and the 2026 Finance Bill for Government to consult on the proposals to fulfil the Government’s intention to “protect the family farm” while better enabling the Government to meet its fiscal objectives and close the tax loophole. (Conclusion, Paragraph 48)

Stakeholder concerns around the Budget’s taxation proposals have made it difficult for the Government to articulate and deliver its wider vision for agriculture. It has also strained the relationships with those who will be responsible for helping to deliver that vision. A pause in the implementation of taxation reforms would allow for better formulation of tax policy and provide the Government with an opportunity to convey a positive long-term vision for farming. (Conclusion, Paragraph 49)

The Government should delay announcing its final APR and BPR reforms until October 2026, to come into effect in April 2027, to provide more time for farming businesses to conduct succession planning and seek appropriate professional advice. The Government should use this time to consult on its proposed changes, conduct an impact and affordability assessment, and consider policy measures and mitigations to reduce any unintended negative consequences. This consultation and assessment must consider the best means to: 33 a. Prevent APR and BPR being used to avoid inheritance tax while allowing farms to be passed between generations intact. b. Protect the most vulnerable, including those with less access to financial and legal advice those who will pass away within the next seven years. c. Prevent negative impacts on tenant farmers. d. Ensure food security is not threatened but enhanced. e. Ensure its policies reflect specific challenges or circumstances in the devolved administrations, given variations in farming structures, land prices, economic conditions and legal systems. The Government should also publish its evaluation of and rationale for following or not following alternative policy measures presented by stakeholders such as the Institute for Fiscal Studies and the National Farmers Union. (Recommendation, Paragraph 50) Communication and consultation

The experience of the Sustainable Farming Incentive 2024 (SFI24) closure follows a pattern within Defra of poor communication and last-minute decision-making following rumours and Departmental leaks. As with the sudden closure of the Capital Grants scheme in November 2024, the end of SFI24 came with no specific warning, despite the six weeks’ notice indicated in the Rural Payments Agency (RPA) guidance. This has been perceived by the sector as a breach of trust, leaving many questioning future statements and businesses facing significant funding shortfalls. Lessons must be learned from this failure of communication; a restoration of trust is urgently required. It is essential that Defra focuses on rebuilding that trust through good-faith communications with the sector. (Conclusion, Paragraph 59)

We are thankful to the Secretary of State, Ministers and Officials for engaging with our Committee, but we urge Defra to improve its communication with Parliament and be proactive and transparent in its communications. Similarly, communications between Defra and its arm’s-length bodies are lacking and must be improved. (Conclusion, Paragraph 60)

The Government should review how it communicates with the farming sector and properly evaluate the impact recent communications have had on trust in the Department. It should provide its analysis and proposed solutions in its response to this report. (Recommendation, Paragraph 61) 34

Defra should ensure that operational and policy decisions are clearly communicated to its arm’s-length bodies and the farming advice service in advance of them being made public. It should investigate the causes of the leaks of its proposed changes to the Capital Grants and SFI schemes and put protocols in place to support proper and professional information sharing. Details revised protocols should be set out in the response to this report. (Recommendation, Paragraph 62)

Defra must improve its communications with Parliament and ensure that statements regarding policy are made in the House and subject to voluntary and proper scrutiny. Defra should affirm its commitment to doing so in its response to this report. (Recommendation, Paragraph 63) 35