Rachel Reeves faces a new battle with farmers over fears that economic turmoil makes it more likely the Chancellor will cut funding for tackling river pollution and flood defences.
Reeves’ autumn Budget had already signalled that spending cuts may be on the horizon. Its accompanying Red Book warned of “significant funding pressures on flood defences and farm schemes of almost £600m in 2024-25”, that meant it was “necessary to review these plans from 2025-26 to ensure they are affordable”.
Farmers told The i Paper that cutting agriculture budgets would jeopardise work to protect rivers from pollution, deliver on water quality and meet other environmental targets. They also claim it would damage efforts towards sustainable food production.
Whitehall sources acknowledged the budgets will come under fresh pressure from 2026 onwards, which could be intensified by the bond market turmoil that threatens to wipe out Reeves’ headroom and force her into more cuts.
It comes after major farmers’ protests at Reeves’ decision to increase their inheritance tax bills with reforms to agricultural property relief.
The government said its commitment to supporting farmers is “steadfast”.
James Wallace, CEO of the campaign group River Action, said cutting agricultural budgets would have a “massive detrimental impact on rivers”.
“We desperately need this new government to support farmers so that we can all have abundant food and water in the future,” he said.
The Conservative Environment Network (CEN) meanwhile warned that there is a “real risk” that farmers bear the brunt of the “economic mess”. The Chancellor has refused to rule out fresh spending cuts if necessary to meet her fiscal rule on balancing the public finances, as rising costs of government borrowing on financial markets threaten to swallow up the spare cash she kept aside in November.
The CEN warned that ministers appear “primed” to cut the £2.4bn nature-friendly farming budget, which includes measures designed to protect against river pollution and floods, to meet spending pressures from 2026 onwards, which were already tight and may now constrict further.
Tory MP Jerome Mayhew said: “Not content with cutting agricultural property relief, the government seems primed to cut the nature-friendly farming budget after 2026.
“Cutting this budget would be a fool’s errand for a government supposedly wanting to protect communities from flooding, fight climate change, protect nature, and support British farmers. The government should be figuring out how to raise the nature-friendly farming budget in line with inflation.”
Kitty Thompson, CEN’s senior nature programme manager, said “the nature-friendly farming budget is absolutely critical for increasing farmers’ resilience to flooding, bolstering our food security, reducing pollution in our water, boosting biodiversity, and tackling climate change”.
She added: “Cuts to both the flood defences and farming budgets could have a detrimental effect on water quality, setting back efforts to clean up our rivers.”
The UK Government’s agriculture budget replaces the grants that farmers used to receive under the European Union’s Common Agriculture Policy before Brexit and is essential for keeping many farms afloat.
The grants are tied to environmental measures that farmers must carry out on their land to receive funding and include measures designed to reduce river pollution.
Alongside sewage, agriculture is one of the leading causes of nutrient pollution in rivers. Run off from farms has been blamed for the destruction of waterways including the River Wye.
Government grants support farmers to reduce river pollution by paying for things such as slurry storage and buffer strips between a farm and a waterway.
Martin Lines, a farmer and CEO of the Nature Friendly Farming Network (NFFN), said: “Cutting the farming budget in the middle of a crucial agricultural transition would be a disastrous move. Without proper support to roll out nature-friendly farming at scale, the government will have no chance of ensuring future food security, protecting nature and biodiversity, or meeting its legally-binding climate targets.”
Leicestershire farmer Joe Stanley, a member of the National Farmers Union (NFU) national council, said agriculture was “uniquely placed in the economy to deliver on things like biodiversity, to deliver on climate climate change targets, water quality, air quality, whatever it is” and that slashing spending in this area would mean “cutting funding to the really very few people who can actually deliver on those targets”.
He added: “It’s absolutely self-evident that if you cut the money available to help farmers transition to that more sustainable farming regime, then you’re going to force farmers to intensify, to continue down the path of more environmentally damaging methods, which is going to be their only alternative.”
NFU Deputy President David Exwood said: “The NFU has urgent questions that need answering such as whether government has the long-term, flexible budget available to deliver the Environmental Land Management scheme (ELMs) in England in order to help restore farmer confidence. We estimate £4bn is required to deliver the government’s commitments.
“A priority has to be ensuring ELMs is fit for purpose and working for all farm businesses in all sectors, particularly the uplands and tenant farmers, so we can help to deliver on legislated environmental targets alongside sustainable food production.”
Welsh sheep farmer Naomi Williams-Roberts, who operates under devolved funding, said: “Something that has been said quite a lot is that you can’t be environmentally green if you’re in the red.
“So not having that support from the government, in ways of subsidies, especially during a time of high inflation, just puts more pressure on production and more pressure on the farmer.”
A Department for Environment, Food and Rural Affairs spokeswoman said: “Our commitment to farmers is steadfast.
“That is why this Government is investing £5bn into farming over the next two years – the largest ever directed at sustainable food production and in our country’s history.
“We are going further with reforms to boost profits for farmers by backing British produce and reforming planning rules on farms to support food production.
“As we set out in our Plan for Change, we are focused on supporting our farmers, supporting rural economic growth and boosting Britain’s food security.”
The economic challenges facing Reeves
Experts point to global factors such as the impending arrival of Donald Trump in the White House and his potentially inflationary policies as the main driving force behind the recent soaring cost of borrowing.
However, they also acknowledge that Reeves’s decisions to change her fiscal rules to allow more borrowing for investment in infrastructure and place higher taxes on businesses have also had an impact on the markets and hindered growth.
The Chancellor also inherited what the Institute for Fiscal Studies previously described as a “decade and a half of historically poor growth” and left herself a thin £9.9bn head room in the Budget, which is now at risk of being wiped out by the high cost of borrowing.
Losing the headroom could force Reeves to raise more money through taxes or spending cuts.
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