Budget Sparks Hope for Sustainability but Raises Alarms for Family Farms
Government Budget Brings Continued Funding for DEFRA, but Changes in Inheritance and Capital Gains Tax Raise Concerns for Farming Families
The recent government budget announcement has provided a mixed outlook for England’s farmers and landowners. While the funding for the Department for Environment, Food and Rural Affairs (DEFRA) remains unchanged, significant changes to inheritance tax and capital gains tax have caused widespread concern. DEFRA has secured a budget of £2.4 billion for the next financial year (with no adjustment for inflation), a significant portion of which is earmarked for Environmental Land Management (ELM) schemes.
The news about proposed changes to Agricultural Property Relief in Inheritance Tax has alarmed many in the sector. As it stands (and with much of the finer detail yet to be released), if the proposals continue, we could see the stability of family-owned farms threatened as they are split to pay the tax. If we care about British food and food security this is really concerning. This could be disastrous for British agriculture and the production of high-quality food. While some have crunched the numbers to assess the impact, it is clear that there is a disparity between government figures and those within the sector.
The DEFRA budget allocation is set to increase funding for ELM schemes, including the Sustainable Farming Incentive (SFI), reaching record-high levels by 2025/26. This funding aims to drive momentum in environmental land management by supporting farmers who adopt practices that benefit both the environment and the agricultural sector’s resilience. Initiatives under the ELM scheme focus on critical areas such as soil health improvement, water management, and biodiversity restoration – efforts that promise a healthy and resilient future for English farming while restoring natural landscapes for generations to come.
However, the picture is not as promising as it first appears. Labour have criticised the previous Conservative government for failing to spend the entire DEFRA budget. We have just been made aware (20th November), by the Central Association of Agricultural Valuers (CAAV) that the Rural Payments Agency are currently not issuing any capital grants. Apparently this is due to an increase in application numbers and growing budget pressures. This is extremely concerning given the Government would have known the popularity and importance of the Capital Grant to farmers and they have only just set the budget for the forthcoming year. This I believe is short sighted indeed.
On top of this news the Government have yet to meet their commitment to release information on the Countryside Stewardship Higher Tier agreements. Farmers were promised that, by late summer, they would be able to start putting together applications. It now appears this information will not be available until next year, which will leave many farmers unable to apply for grants.
DEFRA has stated that the increased funding allocation for ELM offers meaningful support to farmers. However, many farmers, particularly those in upland areas, are in legacy schemes and are unable to access new initiatives. Earlier this year, DEFRA promised details on how agreement holders could end existing schemes early to access new schemes such as SFI and Higher Tier. The detail has not been forthcoming and leaves farmers uncertain as to the outcomes. This lack of clarity is particularly concerning given the ongoing decline in Basic Payment Scheme (BPS) payments. The figures for 2025 paint a bleak picture. A further reduction in BPS payments was expected, but next year’s payment will be at least 50% lower than the amount received in 2024—a 76% reduction on the reference amount. For many farmers already in schemes such as SFI or Countryside Stewardship, there are limited options to find additional funding.
While new technology and practices may facilitate innovative approaches, they require significant investment and come with high risk. Some farms will need to adapt their operations, while others already operating on tight margins may struggle. Currently, the only revenue based grant available to farmers is the SFI, which provides revenue payments for specific land management practices. Now open to all applicants, including new entrants, it can help provide additional income. However, the scheme may not be suitable for everyone, and details of further schemes are still awaited.
For many farming families, the proposed tax changes will increase the pressure of generational transfers, potentially forcing difficult decisions about selling land or assets to cover tax liabilities. These changes could disrupt the continuity and viability of family farms. Ultimately, this could have a significant effect on the fabric of rural areas, undermining the environmental benefits envisioned by the ELM schemes.
So to conclude, for British agriculture to thrive, clear guidance, fair support, and a balanced approach to policy are essential. Without these, the future of farming – and the landscapes and communities it sustains – remains at risk.
