UK farm support spending may come under pressure, courtesy of the upcoming Budget, scheduled for October 30.
This is the view of The Andersons Centre partner, Michael Haverty.
“There is a current under spend of some £100 million across all the agricultural support schemes operating in England and Wales.
“The new Labour government has repeatedly referenced the supposed £22 billion black hole in the UK’s finances and the need to balance the books accordingly since coming into power.
“Under these circumstances, the chancellor could well view agriculture as a sector where budgetary savings can be made,” he said.
Farm support spending
The Andersons Centre representative points to the fact that delays in getting many of the post-Brexit farm support schemes introduced are, at least, partially responsible for the current underspend scenario.
“Agriculture will be subject to a three-year comprehensive spending review into the future. And the upcoming Budget will be part of this process,” Haverty added.
Specifically, where Northern Ireland is concerned, Haverty admits that issues become slightly more complicated.
“The Barnett formula will kick-in when it comes to determining the over all budgets for general public spending available to Scotland, Wales and Northern Ireland,” he said.
Funding for agricultural support has, to date, been allocated via a Block Grant which the devolved administrations can decide how much to spend on agriculture or in other areas: health, transport etc.
“The Barnett formula partly influences the overall size of the Block Grant but devolved administrations, including in Northern Ireland, have been keen to keep agricultural spending at the same levels as under the EU CAP. This may change in future.
“So, we will have to wait until Budget Day to get an indication of how all of this will be worked through,” Haverty explained.
Meanwhile, ‘Agflation’ within UK agriculture continues to fall. This is the bespoke index developed by The Andersons Centre analysts to reflect the impact of inflation across all those inputs used by farming businesses: fertiliser, feed, energy etc.
“The Agflation figure for August 2024 came in at –0.1%. This represents a direct comparison with the economic conditions impacting on agriculture 12 months previous.
“In general terms, farm input costs are now falling, admittedly from a very high level,” he continued.
This week has seen confirmation of the official UK inflation figure for September 2024 averaging 1.7%.
“This is below the 2.0% threshold set for the country by the bank of England. We will have to wait and see if this lower inflation trend is maintained over the coming months.
“But if this turns out to be the case, the chances of seeing a decrease in bank interest rates improve accordingly.
“Such a development would be welcomed by farmers. At one level, it would bring down the cost of current borrowing while also making the task of securing additional finance for their businesses that much easier,” Haverty outlined.
Recent months have seen a steady strengthening of most livestock prices in the UK.
“This is a direct result of supply: demand factors, particularly tight supplies. While this remains the case, farm gate returns should remain reasonably buoyant,” he added.
