Farming industry dismay at new Labour Budget

The farming industry has reacted with dismay to the new Labour government’s first Budget, arguing it fails farmers and threatens to push up the cost of food.

Chancellor Rachel Reeves outlined Labour’s new Budget, in which she announced a number of measures affecting UK food and farming.

In one of the headline disappointments for the industry, Reeves revealed that the farming budget will remain at £2.4 billion for 2025/26, despite vociferous calls for an increase.

She also confirmed a National Living Wage increase of 6.7 per cent, making it £12.21. The National Minimum Wage for 18 to 20 year olds will increase by 16.3 per cent to £10 per hour.

She announced the government is accelerating the end of old farming support schemes. The fastest reductions in subsidies will be for those who received more than £100,000 in direct payments in 2020, as these businesses will receive no more than £8,000 in 2025.

Reeves also declared that the government will reform Agricultural Property Relief and Business Property Relief from April 2026.

In addition to the existing nil-rate bands, the 100 per cent rate of relief will continue for the first £1 million of combined agricultural and business assets and will be 50 per cent thereafter.

Changes to Agricultural Property Relief and Business Property Relief were widely feared by the NFU due to the ”crippling” impact it would have on family farms and overall domestic food security.

‘Future of farms at risk’

The NFU reacted angrily to the Budget, describing it as ”a blow to British farmers”. The union warned that it will add to the cost of producing food at a time when hard-pressed British farmers cannot absorb it, meaning either the supply chain or consumers will end up bearing the brunt.

The impact on British family farms which, already stretched to breaking point after a decade of tightening margins, cost inflation and extreme weather events, could be the final straw for many, it said.

And the union added that changes to Agricultural Property Relief (APR) and Business Property Relief (BPR), despite repeated assurances from ministers that this wouldn’t happen, will put the futures of many family farms and the people who farm them at risk.

The NFU said farmers are also reeling from the announcement of a speeding up of the phasing out of old support schemes, which amounts to a significant cut to farm incomes, at a time when their replacement schemes still leave many farm businesses locked out.

Together with wage rises and added costs to businesses that apply across the economy, these policies raise serious questions about the future of British food security and the impact on food supply and prices, the NFU said in a statement.

Reacting to the announcements, NFU president Tom Bradshaw said: “This Budget not only threatens family farms but will also make producing food more expensive. This means more cost for farmers who simply cannot absorb it, and it will have to be borne by someone. Farmers are down to the bone and gristle, who is going to carry these costs?

“It’s been a bad Budget for farm confidence, which is already at an all-time low. After today farmers, including tenants, have more uncertainty and more worry, not less.

“When you look farmers in the eye and make them a promise, keep it. The shameless breaking of those promises on Agricultural Property Relief will snatch away much of the next generation’s ability to carry on producing British food, plan for the future and shepherd the environment.

He added: “It’s clear the government does not understand that family farms are not only small farms, and that just because a farm is a valuable asset it doesn’t mean those who work it are wealthy. Let’s not sugar-coat this, every penny the Chancellor saves from this will come directly from the next generation having to break-up their family farm.

“This is one of a number of measures in the Budget which make it harder for farmers to stay in business and significantly increase the cost of producing food.”

Nonetheless, the NFU did concede that there was some good news within the budget, as those hit by devastating rainfall earlier this year will immediately have access to the £60mn Farm Recovery Fund, an increase of £10mn.

The union also acknowledged the fact that the agricultural budget for England has also been maintained, with Defra confirming this year’s budget to be £2.6bn to reflect the underspend from the previous government.

‘At a tipping point’

However, AHDB economics and analysis director, David Eudall, expressed dismay that this year’s farming budget was not increased by the new government.

Prior to today’s budget, the UK farming community had lobbied the government for a renewed multi-year annual agriculture budget of £5.6bn in order to support the economic stability of farm businesses.

Eudall said: “The funding pot for agriculture in the UK has remained constant at £2.4bn since the 2019-24 parliament. During this time, inflation has led to a 44 per cent increase in farm costs while the agriculture budget remains the same.

“We are at a tipping point of how effective this budget can be in meeting the desired outcome of balancing food security, supporting farm efficiency, and delivering environmental benefits given the inflationary pressures we see.”

On changes to inheritance tax on farms, he added: “The impact of the changes to inheritance tax means that from April 2026, a farm worth £2mn will have a £200,000 tax requirement to pay on the £1mn above the threshold. For every additional £1mn the farm is worth, a further £200,000 will be required to be paid in inheritance tax.”

Frozen fuel duty

Elsewhere, it was announced that fuel duty will be frozen this year and next, with the existing 5p cut maintained.

Chief executive of business group Logistics UK, David Wells, commented: “The Chancellor’s decision to freeze fuel duty for a further year is welcome news for the logistics sector. Nothing moves without logistics: the sector supplies our hospitals, schools, factories, shops and homes with everything they need, everywhere, every day.

“The sector is vital to any plans to stimulate growth across the economy, and this respite is welcome news for a sector already seeing increasing business failures over the last year.”

Wells explained that the logistics sector operates on very narrow margins – often only 2.5 per cent – with fuel representing a large proportion of the weekly operating cost for hauliers.

“Logistics powers every part of the UK’s economy – it is the UK’s system for growth – and today’s announcement should drive confidence in our sector’s ability to deliver for its customers.”