Autumn Budget 2024: Analysis on the agriculture budget in England

Rumours of significant cuts to Defra’s overall budget for next financial year have proved false, with an overall increase of 2.7% in real term growth. However, this has not been extended to the agriculture budget, which essentially remains static at £2.4bn for England for 2025/26.

The commitment to the Environmental Land Management (ELM) schemes and investment in productivity growth provide a degree of stability, but it will not be sufficient to deliver the government’s ambition or support the full potential of the industry.

Of the £2.4bn, there is an intention that that £1.8bn will be spent on ELM schemes; £1bn more than in the last financial year. The continuation of the rollout of the ELM schemes – Sustainable Farming Incentive (SFI), Countryside Stewardship (CS) and Landscape Recovery – is good news and does provide a level of stability and confidence.

• The Sustainable Farming Incentive 2024 is open for applications now with more than 102 actions with something for most farm types.
• The Countryside Stewardship Higher Tier scheme will be launched later this year with applications opening in early 2025.
• There is expected to be a third round of the Landscape Recovery scheme targeting large-scale, long-term, collaborative projects.

There is a major sting in the tail. To fast-track expansion of ELM schemes, Defra says that more funding needs to be shifted from the remaining direct payments, despite the £200m underspend carried over for several years. Many expected a smooth decline of remaining direct payments by about 15% per year over the final three years in 2025, 2026 and 2027.

The Rural Payments Agency (RPA) information on delinking states: ‘RPA will pay delinked payments each year from 2024 to 2027. The amount you receive will decrease each year as we apply progressive reductions.’ However, this does not state what the progressive reduction would be beyond 2024, and the government has now decided to make ‘accelerated reductions’.

The details are still being confirmed, but the proposal is that delinked payments for all recipients in 2025 will be capped at a maximum of £7,200 for those with reference amounts of more than £30,000, and those with a reference amount of less than £30,000 will have a 76% reduction applied.

This accelerated reduction will impact on all businesses, with much lower delinked payment in 2025 than could have been expected or planned for in cash flow projections.

CLA calculations indicate that a business with a reference amount of £20,000 will receive a payment of around £4,800 in 2025, which is £2,200 less than might have been expected. A business with a reference amount of £75,000 will receive £7,200, which is £15,500 less than might have been expected next year. There is no indication of what the delinked payments will be in 2026 and 2027.

A calculator is expected to be available from the Rural Payments Agency shortly.

The remainder of the budget will go towards supporting productivity growth. Some of this will be continuation of funding into research and innovation and potentially new rounds of the Farm Equipment and Technology Fund and the Farming Transformation Fund during 2025. These grant schemes have previously funded reservoirs, farm business solar installation, slurry stores, and farm equipment. The grant schemes remain under discussion.

A key area for development is the advice programme; the current Future Farming Resilience Fund is due to end in March 2025. The CLA has called on the government to increase this area of funding in the short term to support the industry transition and provide environmental baseline assessments. Other schemes under review will be the Farming In Protected Landscape (FIPL) which has been very popular.

This funding also includes a payment of £60m under the Farming Recovery Fund, a £10m increase on the previous government commitment for damage caused by Storm Henk and extreme winter rainfall. More information will be published shortly.

There are also funding commitments outside the agriculture budget, which is good news. There is £400m in capital funding pledged over the next two years for tree planting and peatland restoration. This is as well as a continuation of the flood resilience budget at roughly the same level of £1.2bn a year, though the balance of spending on maintenance vs new defences is still unknown.

While the commitment to the ELM schemes is welcome, the accelerated cuts to direct payments next year will harm many farming businesses. Overall impact will vary according to individual situations, and will also depend on how the funding is allocated across the different ELM schemes and productivity support, and how easy funding is to access. We expect more information on this in the coming weeks.

Our most urgent focus is the accelerated reduction in delinked payments. Beyond that, we will work with Defra to develop the right schemes and improve accessibility and value to members. We will continue our lobbying on the three-year spending review due in March 2025.

The CLA’s spending review submission was for a bigger budget (£3.2bn that the CLA had calculated and pushed for in 2025/26, rising to £3.7bn by the end of this Parliament). It included more environmental public goods, a new Nature for Climate Fund, funding for voluntary 30by30 and improving protected sites, productivity programme and rural development.

The static agriculture budget is a reduction in real terms and does not align with many studies that show that there is already a funding gap if the government is going to meet its environmental targets - the private sector is unlikely to take up the slack in the short term. It also does not tally with Defra’s priority to ‘support farmers and delivery food security’, and erodes the trust built with Defra in recent years through a partnership approach. The impact on individual businesses will depend on how the funding is distributed between schemes, and the access, but all of this will mean more change rather than stability.