UK government is rolling out a “new deal” aimed at making farm businesses more profitable and sustainable, following widespread protests over recent agricultural policy changes.
The announcement will be made at the Oxford Farming Conference on Thursday, where Environment Secretary Steve Reed is set to address concerns regarding the future of British farming and its economic viability.
The Background of Unrest
Farmers across the UK have expressed growing dissatisfaction with government policies, particularly the controversial changes to agricultural inheritance tax and the phased-out subsidies once provided under the EU’s Common Agricultural Policy (CAP).
Under the EU system, farmers received a flat rate for each acre of land they farmed. This system, designed to support farmers, provided financial security, ensuring they could maintain production while keeping food prices low for consumers.
However, with Brexit reshaping the agricultural landscape, these subsidies are being phased out, replaced by a new framework that rewards farmers for adopting environmentally-friendly practices, such as restoring and protecting nature.
While the UK government hopes to make farming more sustainable in the long run, the transition has caused financial strain for many in the sector.
Farmers have staged protests in their tens of thousands, voicing their concerns about the loss of subsidies, tax changes, and what they perceive as a lack of support from the government.
In response, Reed aims to reassure the agricultural community with a new set of policies designed to bolster farm profitability and reduce dependency on subsidies.
The Government’s Strategy
Reed’s “new deal for farmers” focuses on increasing the profitability and sustainability of farming businesses.
The government is looking to move away from the old subsidy system, which rewarded farmers based on the amount of land they farmed, and shift toward a more environmentally conscious approach.
Under the new model, farmers will be incentivized for their efforts in enhancing biodiversity and tackling environmental challenges, including carbon sequestration and flood prevention.
However, as the country faces economic uncertainty, with the cost of living increasing and food prices rising, Reed’s plan faces significant challenges. For example, farmers are only paid a small fraction of the value of their products.
Research has shown that farmers make just 1p from every loaf of bread or block of cheese sold, raising concerns about the financial sustainability of their operations.
The government’s new focus on rewarding farmers for environmental contributions may alleviate some long-term pressures, but it may also come at the cost of immediate profits for many struggling farmers.
Reed has made it clear that the aim is to make farm businesses less reliant on government subsidies, and that long-term sustainability will be achieved by rewarding those who take steps to protect the environment.
Despite this, farmers remain concerned about the possible negative consequences of these policy changes.
The Inheritance Tax Controversy
One of the most contentious issues facing farmers in the UK is the government’s move to introduce a 20% inheritance tax rate on farms worth more than £1 million, set to take effect in 2026.
Under the current system, agricultural land is exempt from inheritance tax, provided the land is passed on to heirs who continue farming it.
However, the planned changes will mean that farms valued above £1 million will be subject to a 20% inheritance tax rate, to be paid over 10 years.
Many farmers are concerned that these changes could push them into financial ruin. On average, farms make just a 0.5% annual return on the value of their land, livestock, and machinery, meaning that the inheritance tax could severely impact the viability of family-owned farms.
The National Farmers’ Union (NFU) has warned that this tax burden could be devastating, potentially wiping out the income of many farmers who already face financial challenges.
While the government has emphasized the need to crack down on tax avoidance, especially in light of rising concerns over wealth inequality, farmers argue that the changes could force them to sell off assets or even shut down operations.
The issue remains a sticking point in the ongoing debate about the future of British farming.
Changes to EU-Derived Subsidy Schemes
In addition to the inheritance tax overhaul, the phased reduction of subsidies under the EU’s Common Agricultural Policy (CAP) has added to the distress in the farming community.
For years, CAP has provided crucial financial support to farmers, with the UK receiving billions of pounds in subsidies. Under the current government’s plans, these flat-rate payments are being phased out in favor of nature-friendly farming schemes.
From 2025-2026, farmers will see a dramatic reduction in subsidies, particularly for smaller farms. For example, a payment of £40,000 would be reduced by 76%, leaving the farmer with just £7,200.
The Department for Environment, Food, and Rural Affairs (DEFRA) has indicated that it plans to continue scaling back payments, with many farmers facing a significant loss of income.
This shift from a flat-rate subsidy system to one focused on environmental sustainability has prompted widespread concern.
While the government insists that farmers will be compensated for their environmental contributions, many farmers fear that the transition will leave them financially vulnerable, particularly in the short term.
The Rising Financial Risk for Farmers
Recent reports suggest that a growing number of UK farmers are facing financial instability. According to a survey by the organic vegetable company Riverford, 64% of British fruit and vegetable farmers reported that their farms were at financial risk in 2024, up from 49% in 2023.
These statistics reflect broader trends in the agricultural sector, where rising costs, poor harvests, and low product prices are taking a heavy toll.
This financial insecurity is exacerbated by climate change, which has already had a significant impact on farming in the UK. In 2024, farmers experienced one of the worst harvests on record, with many crops failing due to extreme weather events such as floods and droughts.
The government’s own analysis estimates that these climate-related disasters led to a £600 million reduction in revenue for farmers compared to 2023.
Farmers are calling for more robust support from the government to help them adapt to the increasing challenges posed by climate change.
Nature-friendly farming practices, which the government aims to promote, are seen as a possible solution, but farmers need more clarity and certainty on what steps they need to take to qualify for the new subsidies.
Nature-Friendly Farming and Climate Resilience
Environmental groups have emphasized the importance of nature-friendly farming practices, which are seen as essential to improving biodiversity and making farming more resilient to climate change.
Barnaby Coupe, Senior Land Use Policy Manager at The Wildlife Trusts, argued that the government must provide a clear and predictable roadmap for nature-friendly farm schemes to give farmers the confidence to invest in environmental practices.
“We need a long-term, sustainable plan to support farmers as they transition to nature-friendly and climate-adapted farming,” Coupe said.
“The government must outline the future of farming schemes and give farmers the certainty they need to make the changes required to ensure their livelihoods and the health of the land they manage.”
Indeed, the need for a more resilient farming industry has never been more urgent. In the face of increasing climate breakdown, including the record number of flood warnings in England’s best-quality farmland, nature-friendly farming could play a crucial role in mitigating the impact of extreme weather events on agricultural productivity.
The Road Ahead
Despite the protests and the ongoing uncertainty, Reed is expected to announce updates on the government’s land use framework, which will prioritize areas for farming and nature. Additionally, ministers are working on a food strategy aimed at protecting the UK’s food security from the effects of climate change.
The government is also expected to publish a farming roadmap in early 2025, which will provide farmers with more clarity on the future direction of farming subsidies and the role of nature-friendly farming.
However, for many farmers, the future remains uncertain, and they are calling for more immediate support to ensure their survival during this difficult transition.
As the UK government presses forward with its new vision for agriculture, the question remains whether it can balance the needs of farmers, the environment, and consumers without further alienating the rural communities that form the backbone of the UK’s agricultural industry.
The “new deal” may offer some hope for a more sustainable future, but it will take more than just promises to repair the damage already done.
