Farming in Wales in 2025: Challenges and Opportunities

In Wales, farming is a vital profession, central to the preservation of the Welsh language and rural culture. Despite its significance, it remains a physically demanding, low-income sector, largely made up of small, family- run livestock farms with an average annual income of around £22,000. We acknowledge that remuneration is low considering the intensive, remote and year-round nature of the work. (Conclusion, Paragraph 16)

We re-emphasise the cultural importance of Welsh farms, which not only produce food but are the foundation stones of local communities and help sustain the Welsh language. A higher proportion of Welsh speakers work in agriculture compared to the general Welsh population, making the sector a linguistic stronghold. (Conclusion, Paragraph 17) Inheritance Tax Reforms

We support the objective of reforming Agricultural Property Relief (APR) and Business Property Relief (BPR) to close the loophole that encouraged wealthy investors to purchase agricultural land as a means of avoiding tax. (Conclusion, Paragraph 49)

Impact Assessments based on farm valuations may offer a general indication of how many farms could potentially exceed the £1 million Inheritance Tax (IHT) threshold, however such assessments are limited. Without access to detailed information on individual farm circumstances, such as estate ownership structures, succession plans, and gifting arrangements, these estimates lack precision and risk being misleading. We acknowledge that relying solely on farm valuation-based data could result in an inaccurate picture of the true impact of the IHT reforms on Welsh farming communities. (Conclusion, Paragraph 50) 40

We are concerned that the UK Government has been unable to provide any clarity on the specific impact of its proposed IHT reforms in Wales or supply any Wales-specific data. Only UK-wide figures for farming estates potentially liable to pay IHT have been published, and no disaggregated data for Wales was provided to us by the Government. (Conclusion, Paragraph 51)

We are also concerned that the change in policy may have a disproportionate impact on elderly farmers or those with terminal illness who have arranged their affairs on the basis that their estates would not be subject to IHT, and will not have an opportunity to change their succession arrangements in ways which would legitimately minimise any eventual IHT charge. We are also concerned by the effect of these tax changes on farmers in Wales which, as we heard from RABI, already have high rates of physical and mental ill health. (Conclusion, Paragraph 52)

The Government was complacent in the way it introduced such a major change to the tax treatment of farms in Wales. The absence of an assessment of the impact on Welsh farming estates created a vacuum which was filled by different organisations publishing competing statistics which predicted a varying scale of impact for those who inherit farming estates. Consequently, an unnecessary climate of uncertainty and confusion has emerged in an industry central to the cultural, environmental and economic fabric of rural Wales. (Conclusion, Paragraph 53)

We are disappointed that the Government has maintained a complacent approach to measuring the impact of these tax changes despite the scale of public disquiet in Wales. In the absence of a Wales-specific Impact Assessment, the UK Government must delay implementing its final APR and BPR reforms until one has been published and scrutinised by the Welsh Affairs Committee. We recommend that, working in collaboration with the Treasury, HMRC, Wales Office and Welsh Government, all the available data that relates to farm ownership in Wales should be revisited to develop a more detailed understanding of the potential impact the changes to IHT may have on farmers in Wales who intend to leave their estates to the next generation of Welsh farmers. (Recommendation, Paragraph 54) Funding, Ringfencing & Barnettisation

We acknowledge that the UK Government’s decision to remove the ring- fencing and apply the Barnett Formula to future agricultural funding was made in response to a request from the Welsh Government. We note that the Welsh Government’s view on this decision has evolved over time. (Conclusion, Paragraph 65) 41

It is a fundamental principle of devolution that decisions affecting Wales should be made in Wales and that the Welsh Government should have autonomy over its budget, without ring-fencing imposed by the UK Government. (Conclusion, Paragraph 66)

We note the concerns raised by stakeholders during our oral evidence sessions about the potential for this change to lead to a reduction in Welsh agricultural funding. The evidence we received from the UK and Welsh Governments does not suggest that Welsh agricultural funding will decline following the removal of ringfencing and the application of the Barnett Formula. The Welsh Government has allocated £366 million for agricultural support in 2025–26, £29 million more than the £337 million baseline set by the UK Government for the same period. (Conclusion, Paragraph 67)

To help safeguard the future of agriculture, we believe there is a strong case for the Welsh Government to maintain the practice of ring-fencing agricultural funding. This would provide continuity, certainty and ensure that all allocated resources are dedicated exclusively to supporting Welsh agriculture. (Recommendation, Paragraph 68)

We recommend that the Treasury and Wales Office work collaboratively with the Welsh Government to ensure that the baselining of agricultural funding into the Welsh Government’s block grant, alongside the application of the Barnett Formula to future allocations, does not lead to a real- terms decline in funding for Welsh agriculture. It is vital that this does not become a mechanism through which agricultural funding for Wales is gradually reduced, relocated or deprioritised in future spending decisions. (Recommendation, Paragraph 69) Trade

We welcome the foundational agreement between the UK and EU to establish a common Sanitary/Phyto-Sanitary (SPS) zone. However, we are concerned about the lack of a clear timeline for when an SPS zone will be established. (Conclusion, Paragraph 80)

The UK Government must intensify efforts to fully establish an SPS zone with the EU, as a key step towards reducing trade friction for Welsh agricultural exports. We call on the Government to publish a roadmap for how they plan to establish an SPS zone between the UK and EU by May 2026. (Recommendation, Paragraph 81)

The UK’s Free Trade Agreements (FTA) with Australia and New Zealand will disproportionately disadvantage the agricultural sector in Wales. Beef and sheep meat make up a significantly larger share of the agricultural sector in Wales compared to England. As a result, Wales is more exposed 42 to the potential impact of imports from Australia and New Zealand under these trade agreements. We are concerned that, as these imports increase yearly, Welsh beef and lamb producers will face greater competition from Australian and New Zealand imports and may struggle to remain competitive. (Conclusion, Paragraph 89)

We are concerned that Free Trade Agreements have been entered into in the full knowledge that Wales’ agricultural industry may be negatively impacted. The Government must ensure that FTAs do not act as a ‘Trojan Horse’ that, overtime, will undermine the viability of farming in Wales. Although Australia and New Zealand do not make full use of their existing Tariff Rate Quotas, there is no room for complacency here given the extent of the challenge increased international competition will pose to the industry in Wales. (Conclusion, Paragraph 90)

As the Tariff Rate Quotas progress towards a highly liberalised trade arrangement, the UK Government, in consultation with the Welsh Government and Welsh industry, should publish an action plan which sets out how farms in Wales will be supported to compete in the new market and how any negative economic effects will be identified and mitigated. This plan should be prepared with the acknowledgment that its purpose is not only to protect individual Welsh farms but to maintain the economic and social wellbeing of rural communities across Wales. The action plan should be published by the end of May 2028 which represents the mid-point between implementation of the Australia and New Zealand Free Trade Agreements and the first significant milestone in the liberalisation of beef and sheep meat Tariff Rate Quotas. (Recommendation, Paragraph 91)

We are concerned about the perceived disparity in production standards and the levels of financial support received by farmers in countries that the UK Government is negotiating trade agreements with. We are also concerned that lower-cost imports produced to less stringent standards could enter the UK market at prices below the cost of domestic production in Wales, potentially undermining the competitiveness and long-term viability of Welsh farming. (Conclusion, Paragraph 96)

We recognise that there is some dissatisfaction among stakeholders concerning the effectiveness and scope of the Groceries Code Adjudicator. There remain concerns about whether the Groceries Code Adjudicator has sufficient powers to address the full spectrum of challenges facing the Welsh agricultural sector. (Conclusion, Paragraph 101) 43 The Future

We support a long-term vision for farming in which generational transition within the sector is more actively supported. This includes creating clear and viable pathways for new entrants into farming, while ensuring that older farmers feel confident and assured to pass on their farms to a new generation of farmers. We are concerned that the UK Government fails to recognise that part of the uniqueness of Welsh farming is its larger network of tenant farmers than in England, which forms a key mechanism for allowing new entrants into the farming sector. (Conclusion, Paragraph 110)

The UK Government should work in close partnership with the Welsh Government to develop more targeted support and technical upskilling programmes for young and new entrants into the Welsh farming sector. In doing so, it must actively promote and protect the vital role of tenant farming in Wales as a pathway into the industry. (Recommendation, Paragraph 111)

The UK’s food security is dependent upon sustainable domestic production, and by that measure the trends in Wales should be cause for concern. The number of people employed in the industry in Wales has declined, trade with key European markets has declined and livestock numbers in Wales have declined. We are concerned that a continuation of these trends might be seen as inevitable and policy makers in Cardiff and Westminster should focus on strengthening and growing the industry as part of a strategy to support domestic production and maintain UK food security. (Conclusion, Paragraph 117)

Farming practices and conditions in Wales differ significantly from those in England, and it is essential that these differences are fully understood by policy makers in Westminster. In its discussions with the UK Government, it is incumbent upon the Welsh Government to make the case for Welsh farming, but it is essential that the Wales Office works to ensure that the needs of Welsh farming are accounted for in Whitehall as part of UK-wide policy development. Our report plainly shows that in this endeavour the Wales Office under successive Governments has not been as successful as it needs to be to build confidence among farmers in Wales. (Conclusion, Paragraph 121)

The UK Government needs to take specific account of the unique cultural, environmental and economic circumstances of farming in Wales when making future policy decisions which have direct implications for the agricultural sector in Wales. We recommend that any future policy decisions directly affecting the farming sector in Wales be accompanied by a Wales- specific impact assessment led by the Wales Office and undertaken in conjunction with the Government department leading the relevant policy 44 change. This would ensure that the distinct characteristics and challenges of Welsh farming, particularly in comparison to England, are properly considered and not overlooked. A failure to account for the unique role farming plays in Wales, risks undermining the viability of rural farming communities, the Welsh language, and the future of farming in Wales. (Recommendation, Paragraph 122) 45