Options to address farmers’ financial concerns

As farmer protests show no signs of abating, it’s likely the UK government is in the market for any and all non-fiscal options to reduce pressure on family farms – and on itself. If the government is unable or unwilling to move on inheritance tax, it would do well to tackle the long list of other commercial concerns that farmers have, which affect the operation and future of their businesses. Here, we set out a number of options for the government to consider and suggest that action on the terms of trade between the UK and rest of the world would be the best news this government could give farmers for Christmas. 

In the recent budget announcement, changes to Agriculture Property Relief and Business Relief were presented as ways to close a tax loophole for wealthy non-farmer landowners. But the decision has ignited a tinderbox. To understand why farmers have regarded this move as a last straw, it’s useful to see it in the context of a line of policies that have tried to reset the direction for British farming.  

The EU’s Common Agriculture Policy (CAP) was the first to give farmers perverse incentives, which resulted in ‘butter mountains’, ‘milk lakes’ and environmental damage in the 1970s and 80s. It was a cornerstone of EU policy and accounted for more than 70% of EU expenditure in 1980 (falling to 31% by 2021).  

Reform of the CAP in 2003 decoupled farm income support from production and introduced Single Farm Payments based on acreage of farmable land, whether that land was farmed or a golf course. This inflated land prices, propped up marginal businesses and discouraged farmers from making space for nature within farms. So separate payments were needed for agri-environment schemes.  

A further CAP reform in 2013 responded to challenges facing Europe and the world, including climate change, animal welfare and loss of biodiversity. The reform introduced measures including greening of payments, a more equitable distribution of support, and incentives for young farmers.  

Since the UK left the EU in 2016, the long-term vision and direction of travel for the future of farming in the UK has focused on versions of those agri-environmental schemes. The result has been positive but rapid and was always going to be hard for many farmers, most of whom are small businesses.  

The principle of public money for public goods remained enshrined in the UK Agriculture Act of 2020 and was implemented via new payment schemes, with other nations following. Despite the pitfalls and imperfections of its implementation, this is a transition to be celebrated.  

The result of decades of policy inattention is a food and farming system where many farmers are asset rich and cash poor. Meanwhile, others are stuck in a tenant trap by the price and lack of availability of farms for sale. Many make tiny returns from production that is often driving environmental harm. This in turn exposes them to financial and environmental risks posed by climate change, which is resulting in increased frequency and severity of floods and drought.  

Farmers are under pressure from buyers to deliver at low cost, to exacting specifications. While a transition to net zero in other sectors is seen largely as an opportunity for investment in new technologies and job creation, in farming the lack of support to invest in the transition or rewards for higher environmental standards makes change seem unachievable to many. New trade deals gave zero-tariff, zero-quota access to beef and lamb from Australia and New Zealand, where environmental and animal welfare standards are lower and the policy and ambition and progress on net-zero and nature-positive farming is weak and well behind that of the UK. It is no wonder so many farmers are feeling exposed and under pressure.  

Farmers should not be expected to solve the problem alone and shoulder the costs of the transition to more regenerative farming. Farmers need support to ensure a just transition to a more economically and environmentally resilient and sustainable food system. Supply chain actors including processors and retailers, along with financial institutions, all have a role to pay. Any strategy for shifting financial flows towards support for regenerative practices and building a resilient food system will need to adopt an ‘all hands on deck’ approach across the value chain, as our roadmap for financing a regenerative agricultural transition in England articulates.  

Despite the protests and the pressure of the last weeks, chancellor Rachel Reeves seems unlikely to backtrack on the announcement of changes to Agriculture Property Relief and Business Relief. This should provide the rationale for Defra and other government departments to redouble their efforts to address the perennial problems in our food and farming system.  

Most pressing is to ensure farm payments are sufficient and accessible to all farmers, which can be achieved by improving and supporting the application process and ensuring payments are made swiftly. The Budget announced plans to accelerate the phase-out of the Basic Payment Scheme for farmers, with the intention of redirecting funds from outdated legacy payments towards more ambitious Environmental Land Management schemes. This is the right course of action, but if payments are not made swiftly, it will leave farmers exposed and at risk of incurring financial losses. Supporting and deploying trusted independent programmes of advice and support for farmers through this transition is crucial.   

Farmers tend to be small individual operations compared to the consolidated businesses further up the supply chain, leaving producers vulnerable to unfair trading practices. After intermediaries such as processors, distributors and retailers take their cut, farmers are sometimes left with less than 1% of the profit generated by selling food. Addressing unfairness in supply chains to ensure more value flows to the farmers who are doing good work for climate and nature should be a top priority.  

Despite the upheaval of the last weeks, we still believe it will be possible to create a land of plenty for all while remaining focused on constructive solutions that can bring the sector together to make progress on common goals.  

All these changes the UK can make in domestic policy are fruitless if it does not align its trade policy. At WWF, we’re proposing Core Environmental Standards (CES) that would set in domestic law a minimum environmental threshold for imported agrifood products. This would ensure goods produced overseas meet comparable environmental and animal welfare standards to those required of UK producers.  

This would provide a level playing field for farmers and businesses, securing progress toward a sustainable economy and food system. And it would address many of the underlying causes of food price volatility we have seen since 2020. This proposal could also support an EU reset for a food and veterinary agreement that would reduce import and export costs and delays at the UK border, including in Northern Ireland where food trade is particularly important. 

As an immediate first step we are proposing setting up a working group with DEFRA and the Department of Business and Trade to explore how CES could address the competitive pressure farmers face by being undercut by imports produced to lower environmental and animal welfare standards. This is something that can unite government, farming groups, food manufacturers, retailers and environmental and animal welfare organisations under a common shared goal.  

The effects of action here would not be felt before Christmas, but official backing and sponsorship for action on this basic requirement for trade and investment would give a positive focus for the government and farmers to start the New Year.