Why the spending review matters to you and your rural business
With potential budget cuts looming for farming and the environment, rural landowners must be prepared. Find out what to expect and how the CLA is taking action
You may have heard a lot of noise about the upcoming spending review, but what is it and why does it matter to rural enterprises?
What is a spending review?
At the spending review on 11 June, the UK Government will set out detailed day to day spending plans for individual departments for the years 2026/27 to 2028/29.
Over the past few months each government department has assessed its budget line by line. The departments then submitted requests to the Treasury, detailing how much money they will need and how it will be used. Next, Treasury ministers and officials review these requests, before meeting with the secretary of state of each department to discuss and agree a settlement.
It is important to note that this is not a ‘budget’. Unlike budgets, spending reviews have no legal basis and are instead a statement of intent of government spending. It will not set the government’s taxation policy, so we are not likely to see any changes to things such as inheritance tax. Any announcements around taxation will instead come in the Autumn, but there are a number of aspects to look out for in the upcoming review which will be of significance to rural communities and enterprises.
Why is the spending review important?
As the spending review sets out the budget of departments over the next three years, it will allow them to either expand their work or could lead to them cutting back.
Rumours are not looking positive. The Institute for Fiscal Studies has warned that tough spending choices are unavoidable, with cuts to ‘unprotected’ departments such as Defra, the Ministry of Housing, Communities and Local Government and the Home Office expected. These departments have been told that they are expected to identify “a minimum of 5% savings and efficiencies against their current budgets.” Chancellor Rachel Reeves has also conceded this week in a speech that “not every department will get everything that they want next week.”
Of most concern is the rumour that Defra’s budget will be slashed at the spending review. In turn this could lead to a reduction to the farming budget.
The CLA has long argued that the current funding for the agricultural budget is not sufficient for the government to hit its environmental and food security targets. A reduction in the farming budget will mean that fewer farmers are able to join new agri-environment schemes in the future, or be unable to apply for further funding from these programmes.
It has been reported that future funding may only be available for specific types of farms, rather than being all encompassing. The CLA rejects this proposal and continues to work with the government to shape the future of schemes such as the Sustainable Farming Incentive, to make sure that these work for all farmers and landowners.
The spending review is also likely to lead to cuts to the budgets of Defra’s arm length bodies, such as Natural England (NE). With NE already struggling to meet its obligations, this reduction in funding will only lead to further complications. We cannot expect NE to have the ability to use the powers it is being granted in the Planning and Infrastructure Bill properly, and we are therefore putting forward amendments to the bill to reduce these powers.
CLA action
The CLA has been well ahead of the spending review. In February, we presented our review submission to the government titled ‘a plan for growth for rural areas’. This was based on our Rural Powerhouse priorities, echoing Labour’s five missions, and set out a positive case for government investment into the countryside.
We have since continued to put forward the case to the Treasury and Defra of the importance of the farming budget and the continuation of the agricultural transition. The CLA has repeatedly lobbied civil servants, parliamentarians and ministers around this, as well as featuring in the national and trade media multiple times on the topic.
We will be keenly watching how the spending review unfolds on 11 June, and CLA experts will ensure that guidance and advice is provided on how you can plan the next steps for your rural business.