Will the UK Government give away the farm?

The last Government (and Liz Truss in particular) concluded farm trade deals with the likes of Australia which were seen to potentially disadvantage UK farmers.

However, a more serious threat has always been a trade deal with the US with its mega food and farming corporations.   Much of the focus has been on the notorious chlorinated chicken, but if it was labelled properly, UK consumers could avoid buying if they wished (although it might be more difficult to avoid in takeaways and the catered food sector more generally).

The hope of a bespoke UK trade deal with the US may be a mirage.   However, it is clear that the UK Government has been prepared to make concessions on farm trade to secure a deal.   For its part the US administration needs to offer something to its rural base which may suffer from other measures.

Admittedly, the Government has been reluctant to make concessions on what are known as sanitary and phytosanitary measures, for example it is not willing to give ground on animal welfare or food hygiene standards.  This means that hormone treated beef will not arrive in the UK.

Britain is a major exporter of salmon, chocolate and cheese to the US.  Cheddar shipments have grown from about 4,500 tonnes in 2020 to more than 6,000 tonnes last year.   These are generally price sensitive products.

However, it does seem prepared to give ground on tariffs of up to 12 per cent on US chicken, pork and beef.   That could have significant implications for the UK food industry.

This time farmers have a justified grievance

Under the CAP farmers received a 'basic payment' with larger scale farmers getting more.  How this was spent was only loosely constrained so in practice it could be used for consumption as well as investment in the farm business.

Michael Gove came up with the idea of 'public money for public goods'.  In other words, farmers should be subsidised to farm more sustainably and benefit the environment.   (Note that we are talking just about England, policy in the devolved regions is different).

It took far too long to get the Sustainable Farming Incentive up and running and now it has been closed without the required six weeks notice because the money (£1.8 billion) has run out.   Uptake covers just 50 per cent of funding against a 70 per cent target.

Defra is not a 'protected' department and the Government is short of money as it tries to ramp up defence expenditure.  Nevertheless, some calculations suggest there could be headroom of £400m in the Defra budget.  Perhaps some extra money could be found, certainly wildlife groups hope so.   For a fuller critique: https://www.thetimes.com/article/510e633d-69f1-40fc-bba8-78ef0ce8d9c4

I think that farmers are increasingly realising that the Treasury is not going to back down on the changes to inheritance tax.   Some farmers are talking of going 'full French', but any government that surrenders to direct action risks its authority.

Personally I would have looked at reducing or eliminating the capital gains tax rollover relief for farmland sold for development, but that might be seen at odds with housing policy.

Farmers will still pay half the prevailing rate of inheritance tax and get 10 years back to pay the bill free of interest, a privilege the rest of us don't get.

Yields from farm inheritance tax changes uncertain

The Office for Budget Responsibility has brought out a short report on the proposed changes in inheritance tax for farmers and in Business Property Relief: https://obr.uk/docs/dlm_uploads/IHT-APR-and-BPR-supplementary-release-Jan-2025.pdf

It is necessarily a very technical report, but the main takeaway seems to be the uncertainty associated with the revenue yields which are the stated main objective of the policy.  In other words, the political cost may outweigh the financial gain.   Some would argue that changing the rollover relief for selling land for development would yield more revenue and cause less pain.

Meanwhile a number of major supermarkets, most recently Tesco and Lidl, have declared their opposition to the proposed reforms.  Of course, words are cheap and major supermarkets have been squeezing farmers margins (or worse) for years.

Farmers are notoriously slow in many cases to put succession plans in place, but could be allowed more time to do so, while the precise calculation of the threshold for liability is complex but needs further examination.

Most farmers voted Tory in 2024

After many declaring that they were fed up with the Conservatives, the majority of farmers stayed close to their traditional allegiance and voted for the Tories after all, according to a survey conducted by Farmers Weekly.  (N = 767, 'strong spread by region and farm type', but owner-occupiers may be over represented. Self-selected sample).

Prospective voting surveys showed farmer support for the Conservatives decline from 72 per cent in 2020 to just over 40 per cent in 2024 before the general election.

In the event 57 per cent voted Conservative, while 15 per cent opted for Reform.   Despite the success of the Liberal Democrats in rural constituencies, only 8 per cent voted for them.  4 per cent voted for other (probably mainly the Plaid and the Scottish Nationalists).   Just 4 per cent voted for Labour with the balance made up by non voters and 'prefer not to say'.