Pressing rural issues must be addressed

Two significant issues have hit the headlines recently that are high on the CLA’s agenda. Both are undermining confidence and investment at a time when government should be doing everything possible to support growth.

First, the government’s second Sustainable Farming Incentive (SFI) window opened and then closed within hours after the entire £253 million budget had been allocated.

SFI rewards farmers for sustainable farming practices, paying for things the market does not pay for but from which the whole public benefits. It is not a subsidy for producing food; it is payment for public goods and, when it works well, can represent excellent value for taxpayers. However, this money was allocated on a first come, first served basis, meaning many farmers and land managers will have missed out purely because of this fastest-finger-first approach.

Demand was exceptionally high, with thousands of farmers trying to access SFI26 window 2 and the entire budget going in the first few hours. SFI is now a crucial part of many farm businesses, yet applications opened in the middle of autumn drilling, when farmers were already working flat out.

We have always been clear that there was insufficient funding in this round to enable farmers to help the government meet its legally binding environmental targets. The scramble showed both the strength of farmers’ commitment and the inadequacy of the budget.

The enthusiasm for SFI should be welcomed. It demonstrates that farmers want to deliver environmental outcomes alongside food production and are committed to improving nature, climate resilience and water quality.

Defra must now give clear guidance to those who, despite their best efforts, failed to secure an agreement. Farmers need policy they can plan around for years, not funding they must race for in hours. Government cannot expect them to make long-term decisions for nature, climate and food production without long-term certainty. The lesson is simple: funding must match ambition.

The second issue firmly on our radar is the government’s forthcoming Autumn Budget. The CLA is calling on the Prime Minister and Chancellor to scrap the inheritance tax reforms, warning that the current policy is forcing rural family businesses to shrink simply to survive and undermining growth and job opportunities across rural Britain.

A new CLA poll of 700 rural family businesses shows the damage already being done. Eighty-nine per cent have paused investment, while more than a third say they have held back over £150,000 for fear of exceeding the threshold.

Businesses told us they were putting off buying machinery, delaying the creation of tourism accommodation, postponing reservoir projects needed for drought resilience and shelving plans to expand. These are not simply decisions that affect individual businesses. They affect jobs, economic activity and growth across our rural communities.

A particular frustration is that these businesses are often asset-rich but cash-poor. Land, machinery, livestock and farm buildings may have significant value on paper, but they are not cash sitting in a bank account. They are the essential working assets needed to generate income and keep a business operating.

These are business assets, not personal wealth. Farmers already pay income tax, corporation tax, VAT, National Insurance, stamp duty and other taxes like any other business. The concern is that some may be forced to sell the very assets they rely upon to earn a living simply to meet an inheritance tax bill.

Almost half of those surveyed believe they would need to sell part of their business or landholding. If land has to be sold, machinery disposed of, livestock numbers reduced or buildings broken up from the wider business, the result can be a smaller and less viable enterprise. In some cases, it could undermine the long-term future of the business altogether.

Confidence is already fragile. Farm businesses are dealing with low profitability, rising costs, volatile weather, wider economic uncertainty and dwindling incomes after a string of poor harvests. Seven in ten respondents worry their family business will not survive the next ten years, and 29% are seriously considering leaving farming within five years.

At the Budget, the government has a chance to prove that it is serious about growth in every postcode. It must reverse these reforms, deliver a genuine rural reset and give family businesses the confidence to invest, expand and help drive the economy forward.