Category: The Andersons Centre

Defra has announced the Farming Equipment and Technology Fund (FETF) will open for applications on the 29th May for just 6 weeks; closing on 10th July.  All three themes; Productivity, Slurry Management and Animal Health & Welfare will be open at the same time this year.  The FETF offers grants towards the cost of specific pieces of equipment and technology that have been identified by Defra to improve productivity, sustainability and animal health and welfare.

The minimum grant funding per application is £1,000, up to a maximum of £25,000 per theme.  The scheme is not ‘first-come, first-served’ but it is competitive.  Once the application window is closed, all applications will be scored (see below).  Applicants may not receive some or any funding depending on how high their application scores.  In total there is £30m to support the Productivity and Slurry Management themes and a further £16.7m of funding for the Animal Health and Welfare theme.

Scheme guidance is available now to help applicants prepare in advance and can be found at https://www.gov.uk/government/publications/farming-equipment-and-technology-fund-2025   But note, applicants must not buy any items in their application before they receive a Grant Funding Agreement; it may be possible to give a supplier a refundable deposit – see scheme guidance.  There is a set ‘list’ of equipment available and Defra has calculated an expected average cost for each item.

Successful applicants will receive a grant amount of 40% or 50% towards either:

• the average cost of the item – if an item costs you the same or more than the expected average cost in the item lists, or
• the actual cost you pay for the item – if an item costs you less than the expected average cost in the item lists

An item’s expected average cost and grant amount is available in the specification lists, the links to these are provided below;

• Productivity – https://www.gov.uk/government/publications/farming-equipment-and-technology-fund-2025/productivity-items-and-specifications-farming-equipment-and-technology-fund-fetf-2025
• Slurry Management – https://www.gov.uk/government/publications/farming-equipment-and-technology-fund-2025/slurry-items-and-specifications-farming-equipment-and-technology-fund-fetf-2025
• Animal Health & Welfare – https://www.gov.uk/government/publications/farming-equipment-and-technology-fund-2025/animal-health-and-welfare-items-and-specifications-farming-equipment-and-technology-fund-fetf-2025

The list also includes a score for each item; it is possible to increase an application’s score.  For an Animal Health and Welfare grant, a score can be increased by 20% if the applicant can provide evidence that they have discussed their FETF 2025 application with a vet.   When applying for a Productivity or Slurry grant if the SBI has received less than £10,000 of Productivity and Slurry funding from any previous FETF rounds, this can increase the application score by 25%.

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Strong livestock prices and lower feed costs sees Meadow Farm forecast to make a profit from production for only the second time in it’s history in 2025/26.  However, its SFI agreement is important in boosting overall farm profitability.  Any similar business that has missed-the-boat on the SFI will be in a far less comfortable position.

Meadow Farm is a notional 154-hectare (380 acre) beef and sheep holding in the Midlands.  It consists of grassland, with wheat and barley mainly for livestock feed.  There are 60 spring-calving suckler cows with all progeny finished, a dairy bull beef enterprise and a 500-ewe breeding flock.

The 2022/23 year was challenging; although output prices had started to rise (particularly for sheep), input costs increased substantially (feed costs were especially expensive).  Cuts to the BPS meant the overall farm made a loss.  In 2023/24, the gross margin improved due to lower costs and stronger livestock prices.  Overhead costs continued to drift upwards.  The farm again made a loss from production although it was much lower than the previous year.

The 2024/25 year, just finishing, shows an improvement in output once more.  Meadow Farm sells its finished stock in the autumn, so will not have experienced the significant rise in cattle prices since the turn of the year.  Some of the higher variable costs are due to the farm entering the SFI (i.e. herbal ley establishment).   The extra income from the SFI offsets the decline of the BPS and the business profitability improves.

Farmgate cattle prices are exceptionally high currently.  Even using a ‘conservative’ budgeting price compared to the current high prices, for the 2025/26 year about to commence, Meadow Farm is budgeted to make a margin from production.  This is for only the second time (previously in 2021/2022).  However, a (bigger) reduction in the BPS, sees business surplus, similar to the year just finishing.

This farm entered the SFI (2023 version) this time last year.  However, we have modelled an alternative scenario where the farm’s CS agreement carried on until the end of 2024.  This meant it was still working-up its SFI application when the scheme closed on 11^th March.  In this situation, Meadow Farm would be looking at a Business Surplus of just £113 per Ha.  Also, it is not clear what opportunities, if any, may be there in the future for farms like this to enter into environmental agreements.  There is a clear split between the ‘haves’ and ‘have-nots’ when it comes to the SFI.   

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The SFI Expanded Offer (SFI 2024) was suddenly closed on the evening of the 11th March.  Defra has said all existing SFI agreement holders will continue to be paid under the terms of their agreement for its duration.  This means those who submitted their application earlier this year will be paid until 2028.  For many others who will be at different stages in the application process the situation is;

• If you have been offered an agreement, but not yet accepted it, you need to accept you offer within 10 working days of it being offered, if you don’t, your agreement offer may be withdrawn. 
• Where an SFI application has been submitted but no agreement has yet been offered these should be offered as long as the application is eligible (although there is a conflict with the wording in the blog and the press release from Defra with the latter saying these will be ‘considered’.)
• For those who have started an application, but had not submitted it before applications closed, they will not be able to submit the application.  The only exceptions to this are a small group of farmers who were blocked from submitting their applications because they had requested ‘assisted digital’ support from the RPA to apply or due to a system fault.  Defra has given a bit of clarification as to what it is viewing as a ‘system fault’ for the purposes of these exceptions.  This means that, prior to the scheme closing at 6pm on 11th March;
  
  • an application had been started and a system issue prevented the application from being submitted, and
  • the applicant (or their agent) had informed RPA, either by calling the Helpline or by emailing Rural Payments of this issue.

  Where this is the case, RPA has said it will be contacting applicants to let them know when it will be possible to submit their application.  It has also said that if an applicant thinks they fall under this ‘exception’ but their application has been rejected on the system then they can contact RPA either by the Helpline or via email and these will be looked into on a case-by-case basis.

• For those taking part in the the SFI Pilot, they will be able to apply when their pilot agreement ends, or if the agreement has already  finished but they haven’t submitted an application for the expanded SFI offer yet, they will still be able to apply. The RPA will let them know how to do this shortly.

Defra has said now is the time for a ‘reset’ and there will be a revised offering with details being announced in summer 2025, ‘building on lessons learned and stakeholder feedback’.  A budget for the scheme will be confirmed in the Spending Review this summer, it has also said the revised offering will direct funding where there is ‘greatest potential to do more on nature and where there is the least ability to access decent returns from agricultural markets, or other sources of investment, as set out in the Land Use Framework’.

This seems to indicate the scheme will not be returning in the same guise as SFI 2024.  Almost certainly, many of the options deemed ‘lower-value’ (such as the planning elements) will be dropped.  It may also not be a universal scheme.  Geographical targeting could well see priority given to areas like National Parks and National Landscapes (previously AONBs).     

It appears that Defra has been surprised by the popularity of the scheme and the budget was all allocated.  It seems particularly poor administration not to be able to regularly monitor the uptake of the scheme and provide some indication of whether budget limits were being approached.  Indeed, a specific budget had never been set out for the SFI, so it is not surprising that the industry is confused by this ‘budget’ being reached.

The sudden closure has been a massive blow to many who will have spent time and money preparing schemes to now not be able to submit them when they have been told applications can be made ‘all year round’.  This will only further erode English farmers’ trust in the Government.  Especially as the promise to provide 6-weeks’ notice of any changes in schemes has again been ignored. 

Rotational Declarations

With the closure of the SFI, current agreement holders are advised to make sure they consider their Rotational Declaration carefully.  Land managers are reminded that under the scheme rules they are allowed to reduce their Rotational options by 50% in years two and three.   But, they are also allowed to increase the area.  With Defra previously ‘pushing’ for multiple agreements as a way for farmers to increase their area, some may not have fully considered their Rotational Declaration, thinking they could add land on another agreement.  They will be restricted to the Rotational options already being claimed for in their existing agreement but for some this may be a way of increasing land in the SFI.  Unless scheme rules suddenly change…………

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Capital grants will be available again in England after the schemes were closed in the autumn due to budget over-runs.  This was included in a set of announcements made by Defra Secretary of State Steve Reed in a speech at the NFU Annual Conference in February.  They are aimed at boosting the profitability of the farming sector.

The announcements are;

• Capital Grants (existing) – 4,000 applications to this scheme (previously called Countryside Stewardship capital grants) were suspended in November due to budget pressures.  It is stated that these will be processed in full when the new 2025/26 financial year starts.
• Capital Grants (new) – the scheme will open again ‘later this year’.  To limit spending, there will be a a cap of £25,000 for applications to the water quality, air quality and flood management themes.  The trees and boundaries theme will have a limit of £35,000.  There is a total budget of £45m.
• Farm Equipment & Technology Fund (FETF) – another round is due to open in the spring.  This is set to be the final round of the scheme however.   The FETF has not been open since last spring.  There will be a budget of £30m for the Productivity and Slurry Management items, and £16.7m for Animal Health and Welfare.  The announcement states that grants from £1,000 to £25,000 will be available; previously Productivity and Slurry Management Grants were up to a maximum of £50,000.
  
• Other Grants – There has been no announcement regarding the ‘larger’ capital grants which were available under the Farming Investment Fund (FIF) (Improving Productivity, Adding Value, Livestock Housing, Water Management etc).  The Farming Innovation Programme will reopen with funding of £42.5m.  This is a competitive scheme which offers grants for research and development projects that benefit farmers, growers and foresters.  It will focus on the themes of precsion breeding and net zero.  A new funding stream worth £20m called Accelerating Development of Practices and Technologies (ADOPT) will fund innovation.
• Farming in Protected Landscapes (FiPL) – the scheme is to be extended to 2026.  No indication on budget has been provided.
• HLS – those with old agreements under this scheme rolling-on will see payment rates increase.  Agreement holders will be written to by the end of April.
• Animal Health and Welfare – the current ‘Pathway’ will be amended so there is more flexibility for farmers to have funded vet visits for multiple species.
• Seasonal Workers Scheme (SWS) – the Seasonal Worker visa route will be extended for five more years.  The quota will be reviewed annually, although it looks like this will be downwards as it talks about ‘supporting farms while gradually reducing visa numbers as we develop alternative solutions’.
• Procurement – a new requirement for Government catering contracts to favour high-quality, high-welfare products from local farms.  The Government’s ambition is for at least 50% of food supplied into the £5 billion public sector catering contracts to be from British producers or those certified to higher environmental standards.
• Trade deals – it is stated that the Government will uphold and protect the UK’s high environmental and animal welfare standards in future trade deals (a very easy announcment to make and with no cost).
• Defra – a ‘Farming Profitability Unit’ will be created in the Department.  Its remit is not yet clear.  
• Biosecurity – £200 million will be invested to improve resilience against animal disease.  The Animal and Plant Health Agency (APHA) animal health facility at Weybridge will be turned into a new National Biosecurity Centre.

Further details are awaited, particularly on opening dates for the capital grants.  Farmers will be pleased to hear of the re-opening, although it will be interesting to see what/if items have been removed from the ‘lists’.  We will endeavour to keep readers updated.

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Old crop UK feed wheat futures prices (May-25) declined through February.  There has been little news to support prices for some time.  Large opening stocks, high levels of imports and subdued demand will mean the current trend likely continues.  The large import levels of milling wheat in particular have reduced the milling wheat premium from an early season peak of £60 per tonne to around £25 now.

Whilst old crop prices have fallen, new crop prices (Nov-25) have increased, driven by rising global grain markets.  US maize futures in particular have increased considerably in recent months.  Speculative traders (managed money funds) have bought considerable volumes of maize futures, elevating prices.  The weather outlook for maize production in both North and South America had been in question, including excess rainfall in Brazil.  In the main maize producing region of Mato Grosso, planting of maize is more than eight percentage points behind the five-year average.  However, the forecast is for improved weather.

The US weather has also been a key focus.  Key wheat producing states in the US have been on the receiving end of temperatures as much as 15C below normal for February. However, this picture is also improving.  Additionally, the current market price dynamics for maize and soyabeans in the US is expected to drive an increase in maize planting for 2025.  The price gap between old and new crop could close quickly if the funds started selling.

In the short term, there has been support for UK feed barley prices with export demand driving selling opportunities.  This has been much-needed owing to the surplus of out-of-specification malting barley adding to the feed heap from harvest 2024.

One positive aspect for arable markets is the strength of the oilseed rape price.  That said, the crop area has declined significantly in recent years meaning the price support will only benefit the minority of cereals farmers still growing the crop.  In addition, the positive price movement in oilseed rape may not be enough to tempt nervous growers of the crop for 2025 harvest to sell.

A final point worth noting is the direction of fertiliser prices.  Natural gas prices, a key input in the production of ammonium nitrate, hit the highest point since October 2023 in February.  Prices have fallen back, but remain almost twice as high as the same point last year.  So far we have seen an increase in nitrogen prices in the UK market in 2025, but not to the same level as has been observed on the Continent.

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A review of the UK’s farm assurance schemes has been published.  The Review was commissioned by the UK’s farming unions and the AHDB in the wake of Red Tractor’s failed plans to introduce the Greener Farmers Commitment back in March 2024.  It was undertaken by Dr. David Llewellyn, Mark Suthern, Katrina Williams and James Withers.

The Review, which can be found at https://promar-international.com/farm-assurance-review/ concludes ‘…Farm Assurance in the UK is a necessary and important component of the food production landscape and should be retained by the farming and food production sectors, of which and to which, it is a significant asset‘ but it also goes onto say ‘However, farm assurance can and must be improved’.  It found that ‘in spite of the support for, and the benefits of, farm assurance in principle, there is much that is not right in practice. 

The Review identified nine strategic recommendations.  Within each recommendation there are a number of ‘practical’ and ‘actionable’ recommendations (56 in total).  The headline recommendations are;

• On-farm audits must be reduced, simplified and delivered more consistently
• There must be a transformational step forward in embracing technology and managing data to deliver more effective farm assurance with greater added value for all
• Farm assurance schemes need to reset and/or restate their decision-making structures to establish farmers as the driving voice in standards development
• A new industry-led initiative must set out the future environmental ambitions for farm assurance, establishing this as an area of competitive advantage for UK farming
• The inclusion of regulatory requirements within farm assurance standards and audits should be conditional on government and regulators agreeing a form of ‘earned recognition’
• There must be greater coordination in the way in which farm assurance operates across the UK
• Farm assurance schemes must better position the UK farming industry in world food markets and in competition with imported food
• All farm assurance schemes must review, and, where necessary, improve their methods of communication with the farming industry
• The Red Tractor scheme must complete the implementation of recommendations in the Campbell Tickell report.

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The figures for our ‘Friesian Farm’ dairy model have been updated for the Dairy Tech show and ahead of our spring Seminars.  The table below shows the actual results for the last two years, the estimate for the current year, and a budget for the upcoming 2025/26 season.

To recap, Friesian Farm is a notional 220+ cow business in the Midlands with a milk contract on a constituent basis.  It has a year-round calving system, like much of the UK industry, but it is trying to maximise yield from forage.  The figures are for milk years – April to March.

It can be seen that the milk price has moved up nicely for the 2024/25 year compared to the previous one – albeit not back to the highs of 2022/23.  It is forecast that there will be a slight firming of milk values again through into 2025/26.

One of the larger changes for the current year, compared with 2023/24 is the increase in overhead costs.  One of the main drivers of this is the continued upwards pressure on dairy wages.  The increase has also been driven by re-investment needs of the business, plus a general inflationary environment on costs.

Despite this, however, the better milk price, coupled with very good cull and calf prices, means the profitability of this dairy business is much improved this year.

The forecast for 2025/26 is for returns to decline a little.  This is largely driven by further overhead cost increases.  It can also be seen that the contribution of the BPS falls to very low levels.  This is a result of payments to farms in England being ‘capped’ at £7,200 for 2025.

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The revised Countryside Stewardship Higher Tier (CSHT) offering will not be available until next summer.  This news comes as part of a wider Defra announcement on the future of the scheme.  CSHT was supposed to have been opening in autumn 2024 to allow claimants to ‘draw-up’ applications ready for an early 2025 start date.

General

Countryside Stewardship is the second ‘tier’ of the Environmental Land Management (ELM) programme.  It provides payments for land managers who wish to do more intensive environmental work than under the SFI.  With the expanded SFI 2024 effectively taking over almost all previous CS Mid Tier options, the CS is now Higher Tier only.  It is focused on the most environmentally significant sites (such as SSSIs) and woodlands which require more long-term and complex management.

The new CSHT offer includes 132 actions and 145 capital items (including 25 new options), plus a further 6 capital items to fund the preparation of plans that may be required to support an application (see below).  Defra is trying to improve the offer to encourage more people to apply with the aim of 1,200 new High Tier agreements by March 2026.

The details of all the actions, supplements and capital items, including payment rates can be found via https://www.gov.uk/government/publications/countryside-stewardship-higher-tier-get-ready-to-apply .  Note this is only ‘preview’ guidance; it sets out what can be done now to prepare and the funding available, the full guidance will be published before applications open in ‘summer 2025’.

Controlled Roll-Out

Similar to the SFI, CSHT will be rolled-out ‘gradually’.  The first applications will be by invitation only, these businesses will be contacted by RPA from 6th January 2025.  Natural England (NE) and the Forestry Commission (FC) will identify who is invited initially.  This will include;

• those with an existing CSHT agreement that expires at the end of 2025

• those with an approved woodland management plan already in place

• those who want to apply for an agri-environment agreement and have an approved plan in place so are ready to develop an application.

‘Invitations’ will be sent out monthly, to those in the above criteria, to receive ‘pre-application’ advice.  Those that do not fall within the criteria above will be able to contact RPA to let them know they are interested in applying.  More details on this process will be available in February and RPA has asked that customers do not contact them until then (!).

Applications will be made online via Rural Payments.  However, whilst those that will be invited can start to prepare their application from January, it will not be possible to submit an application until ‘summer’ 2025.   Once an agreement has been offered and accepted, the first payment will be made 4 months after and then quarterly thereafter.  CSHT agreements will last for 5, 10, 15 or 20 years, depending on the length of the longest action in the agreement.  Once fully opened, RPA will introduce rolling applications, so it will be possible to apply all year round with monthly start dates.  From summer 2025 applications will open up to a wider range of customers who will be ‘identified and invited’ to prepare an application – further information on this will be provided at a later date.

Defra is also making more ‘tools’ available to applicants for planning their proposals.  These include Implementation Plans, Woodland Management Plans, Agroforestry Plans, Species Rich Management Plans and Feasibility Studies with the aim of reducing the need for intensive pre-application advice from ‘arm’s length bodies’ cutting down on lengthy negotiations.  Furthermore, advice will focus on the actions available under CSHT where previously advice from NE and FC covered the entire holding.

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Following harvest 2024, we have updated the figures for our Loam Farm model.  This shows low profits from the previous cropping year.  In addition, the outlook for 2025 is not great.

Loam Farm is a notional 600 hectare business that has been used since 1991 to track the fortunes of British combinable cropping farms.  It is partly owned and partly rented and is based on real-life data.  It has one full-time worker and employs harvest casual labour.  It grows a range of cereals crops and has entered into an SFI agreement.  The table below provides a summary of the last three harvest years, and a budget for harvest 2025.

The farm is completing its grain sales from harvest 2024.  It has less to sell than average due to reduced yields – a result of the wet weather through the autumn of 2023 and spring of 2024.  Coupled with unexciting prices this means the output of the farm is reduced – some 35% on the 2022 harvest year – although it must be noted that this was an unusually good year.  Although variable costs have fallen, overheads have climbed.  This has resulted in a loss from production.  This year’s residual Basic Payment and the SFI the farm has entered offset this shortfall, but there is a low level of overall farm profitability.

We have commented before about the variability of results from harvest 2024.  Loam Farm is simply an illustration.  Some businesses will have had an ‘OK’ year (although very few are likely to have had a ‘good’ year).  But, equally, some combinable cropping farms will have fared worse than Loam Farm and are facing significant losses for the past year. 

Turning to the budget for harvest 2025, output is forecast to recover somewhat.  This is largely due to yields reverting to average rather than any firming in prices.  Loam Farm has managed to establish its crops this autumn despite some testing conditions.  With costs not changing greatly, profitabilty from production improves so that there is a positive return.  The sharp drop in the Basic Payment for 2025 can be seen – this is a result of payments being capped at £7,200 per farm.  Previously, Loam Farm was budgeting on BPS income of £58 per hectare.  The SFI income has risen as the farm has added some new SFI2024 options.  It shows how important this income stream has become to overall profitability.

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The Capital Grants scheme in England has been closed.  The closure of the scheme was confirmed on the 26th November when a small notice was added to the relevant section of the Defra website stating ‘Capital Grants 2024 are currently closed‘.  Subsequently Defra has written a blog (see https://defrafarming.blog.gov.uk/2024/11/27/an-update-on-capital-grants/) in which it says, ‘due to an overwhelming demand for some capital grant items, the main capital grant offer will have closed to new applications – a total of 76 grant items.  This is being done to prioritise funds for areas that will have the greatest benefit for food security and nature conservation’.  According to Defra, the high demand for some grant items has led to spending levels that ‘aren’t sustainable’ for this year – it is forecast to spend 49% more on capital grants this year than in 2023/24 and 125% more than in 2022/23.

There is no indication when the scheme might reopen, it does talk about being ‘temporarily closed’ to most new applications with a further update in ‘early’ 2025.  For those who have already applied and are waiting, it seems they will be put ‘on hold’ for now and applicants will be contacted in early 2025 with information about what happens next.

The following grants remain open;

• Woodland Tree Health Grants
• Capital Grant Plans and Management Plans
• Protection and Infrastructure Grants
• Higher Tier Capital Grants

Further details for these can be found via https://www.gov.uk/government/collections/capital-items-guidance-for-applicants-and-agreement-holders?utm_medium=email&utm_campaign=govuk-notifications-topic&utm_source=571a361e-7871-4f0d-b943-318bffa13b5b&utm_content=daily

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Scheme Changes

The Welsh Government released further details on the Sustainable Farming Scheme (SFS) on the 25th November.  This sees significant changes made to the scheme since the consultation was issued last year.  The most eye-catching move has been the dropping of the 10% tree-cover requirement.

The document that has been published (see https://www.gov.wales/sustainable-farming-scheme-proposed-scheme-outline-2024-html) is described as an ‘interim position’.  The Government is keen to point out that this is not the final scheme and consultations will continue.  Economic analysis and impact assessments will also be carried out.  The final scheme will be published in summer 2025 ahead of the 1st January 2026 start date.  The current document also does not contain any payment rates.  The Welsh Government is likely waiting to see what it is allocated in Spring’s Spending Review before being able to make this decision. 

The main changes to the SFS are;

• removing the Scheme Rule to have 10% tree cover. This was one of the most contentious elements of the original plans. Universal Action 13 (UA13) has been re-written so that each farm will have to produce a plan to identify the opportunities for planting additional trees and creating new hedgerows across the farm.  There will be no specific farm-level percentage targets however; although there will be scheme-level targets on woodland creation.  There will be grants available for hedges and trees under the Optional Actions tier of the SFS.  The other ‘Scheme Rule’ of having 10% Habitat Area across the farm is being retained.  There is the option to create temporary habitat to meet this requirement, however
• the overall number of Universal Actions has been reduced from 17 to 12. UA4 – Multispecies cover crop; UA6 – Managing modified peatland; and UA10 – Ponds and scrapes, have all been dropped.  UA15 to 17 have been combined into a single, simplified, ‘Animal welfare’ Universal Action.  Most of the Universal Actions that have been dropped have been moved into the Optional Actions – the second tier of the scheme.  Many of the UAs that have been retained have also been revised – with 10 out of the remaining 12 being amended
• the Universal Baseline Payment will be available on Common Land – based on the number of grazing rights
• payments for Universal Actions will be available on Sites of Special Scientific Interest (SSSI)

Details of the changes were announced by the Welsh rural affairs minister Huw Irranca-Davies at the Royal Welsh Winter Fair.

Preparatory Schemes

Until the SFS opens in 2026, there will be a ‘Sustainable Farming Scheme Preparatory Phase of Activity’ with a number of schemes available.  In addition to those outlined at the end of July (Habitat Wales Scheme, Organic Support Payment and the Integrated Natural Resources Scheme) the following grants will also be available, with some already open;

• Growing for the Environment – open from 4th November to 13th December 2024 for funding towards a range of spring and summer crops, such as mixed leys, protein crops and unsprayed cereals.
• Agricultural Diversification and Horticulture Scheme – open from 4th November 2024 to 17th January 2025, provides support for livestock enterprises that are not traditional in Wales e.g. sheep or goat milking enterprise or growing of novel or alternative crops.
• Small Grants – Environment – due to open 13th January 2025 to 21st February 2025, although no announcement has been given as to which theme this will be out of Carbon, Water or Landscape and Pollinators
• Small Grants – Efficiency – due to open from 3rd March to 11th April, supports capital investments in equipment and technology that have been pre-identified.

In addition to these new announcements a reminder that the Woodland Restoration Scheme has just opened and will close on 28th February.  Details of all the schemes can be found via https://www.gov.wales/rural-grants-payments

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Rachel Reeves unveiled the first Budget of the new Labour administration on the 30th October.  As expected, it included large tax increases to fix the fiscal ‘black hole’ the Chancellor says she has inherited.  A number of the announcements have direct implications for farming.

The Office of Budget Responsibility (OBR) has updated its economic forecasts for the years ahead.  These show fairly anaemic growth for the medium term, and inflation not reverting to its target level of 2% until 2029.  Of course, one of the guiding principles for this Government is to boost economic growth.  This is not a short-term process however, and even sucessful policies will take years to show an effect.

Headline points from the speech include;

• As widely trailed, the rules on Agricultural Property Relief (APR) for Inheritance Tax (IHT) are to be amended, along with Business Property Relief.    100% relief will still be available for the first £1 million of combined agricultural and business assets.  On combined assets above £1m, IHT will be payable at 50% of the normal rate (50% of 40% = 20% effective tax rate).  The IHT threshold is to remain fixed at £325,000 until 2030.  At a land price of £10,000 per acre the new rules will hit farms abover circa 100 acres – hardly large farms.  The change is to be introduced from April 2026.  The rules on Potentially Exempt Transfers (PET) are unchanged meaning assets can be given away tax free if the donor survives 7 years.  There will be transitionary arrangements on this where deaths occur between now and April 2026.  The ability to pay IHT over 10 years remains.  From April 2025 land entered into environmental schemes will be eligible for APR
• The rates of Capital Gains Tax are to increase.  The standard rate will rise from 10% to 18% whilst the higher rate lifts from 20% to 24%.  This aligns the rates with those for residential property
• The biggest tax increase comes in the form of a rise in Employers National Insurance (NI) contributions.  The rate will go up by 1.2% from 13.8% to 15%.  The threshold at which payments start is also to be lowered from £9,100 to £5,000.  A very thin silver lining for employers is that the Employers Allowance will rise from £5,000 to £10,500.  The changes to NI are predicted to raise £25bn
• Minimum wage rates are to rise from April next year.  The National Living Wage for those 21 and above will go up 6.7% from £11.44 per hour to £12.21.  The 18-20 year old rate goes up from £8.60 to 10.00, whilst the Apprentice rate jumps from £6.40 to £7.55.  The combined effect of the NI and Minimum Wage increases will have a significant effect on those that employ a lot of labour at low wage rates – for example the fresh produce sector
• The thresholds for Income Tax and NI will remain fixed until 2027/28 as previously announced.  This is effectively a stealth tax as ‘fiscal drag’ gradually brings more people into higher tax bands as inflation takes effect.  Thresholds have been unchanged since 2022.  In a slightly surprising move the Chancellor stated that thresholds will start to be increased in line with inflation again for 2028/29
• Fuel duty will remain unchanged.  Alcohol duty will largely rise in line with inflation although the rate for draft beer is to be cut
• A reform of the Business Rates system is promised within the lifetime of this Parliament.

A key question for agriculture was what the funding for farm support is going to be.  Defra’s Departmental spending allocation is as follows;

The Budget document states that ‘The Government is facing significant funding pressures on flood defences and farm schemes of almost £600 million in 2024-25.  While the Government is meeting those commitments this year, it is necessary to review these plans from 2025-26 to ensure they are affordable‘.  It is not obvious what this means.  The publication goes on to state that ‘[The settlement is] providing £5 billion over 2024-25 and 2025-26 to support the transition towards a more productive and environmentally sustainable agricultural sector in England‘.  This, coupled with the announcement from Defra (see article on BPS in 2025), indicates that the current farm budget in England of £2.4bn per year has been maintained.  The amount for 2025/26 is going to be increased as a one-off to £2.6bn as £200m of underspend from previous years is going to be rolled forward.  This neatly arrives at the £5bn for two years.  In 2025/26 £1.8bn will be allocated to ELM.

A continuation of the current budget (in nominal terms) is not unexpected.  But should be remembered that there has been significant inflation since the £2.4bn for England figure was set in 2020.  Using the OBR’s forecasts going forwards, prices will be 30% higher in 2026 than they were in 2020 – thus this is effectively a circa 30% funding cut.  Furthermore, farm spending was never uprated for inflation when we were part of the EU.  The £2.4bn figure has been almost the same since 2007.  Agriculture is being asked to do more for less.  The settlement is far lower than the £4bn for England the NFU (with Andersons help) calculated as being required to meet Government policies.

Looking beyond 2025/26 (the 2025 ‘subsidy year’) the Comprehensive Spending Review will set Defra’s budget for future years – likely 2026 to 2028.  If public finances remain under strain, there is no guarantee about future funding even remaining at current levels.

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