Budgets down, capital funding up: Navigating Defra’s spending squeeze

The Department for Environment, Food and Rural Affairs (Defra) is one of the losers of the government’s spending review that sets departmental budgets up to 2028-29. This will only add to the frustrations of rural communities and a sector that feels likes it has already born the brunt of Labour’s early policymaking decisions. The spending review was an opportunity for the government to repair its relationship with the sector after the damage of the 2024 autumn budget with the changes to Agriculture Property Relief, as well as the early closure of the Sustainable Farming Initiative. Defra’s budget will undergo a real terms decrease of 0.7 per cent from 2023-24 to 2028-29. This means that departmental spending will flatline in cash terms at roughly £7.5bn. Sector stakeholders have cautiously welcomed Defra settlement having feared that cuts to spending could’ve been far worse.

However, reflecting the Chancellor’s decision to tweak and omit capital spending from her fiscal rules, there is a small win for Defra. Over the course of this parliament, capital spending will significantly increase. Defra is set to receive £16 billion of capital funding from now until 2029-30, equivalent to an annual average real terms growth rate of 2.5%. The challenge for Defra ministers will be deploying this funding effectively to deliver on their ambitions for food, farming and the environment.

The government’s spending review documents set out how some of this funding will be spent:

• £2.7 billion per year in sustainable farming and nature recovery from 2026‑27 until 2028‑29.
• £2.3 billion through the Farming and Countryside Programme and up to £400 million from additional nature schemes.
• Increasing support for nature-friendly farming through Environmental Land Management schemes from £800 million in 2023-24 to £2 billion by 2028‑29.

Beyond the allocations detailed in the review, attention will now turn to how the remainder of the Defra spending envelope will be portioned out and likely through the upcoming policy documents that the sector is eagerly awaiting. From a National Food Strategy to the review into farming profitability and the revised Land Use Framework, Defra ministers need to navigate competing sector demands – an exercise that will almost certainly involve trade-offs. While Defra ministers keep reiterating that ‘food security is national security’, it still feels as though the dots have not yet been fully connected. Securing the nation’s food supply means boosting domestic production, reducing a reliance on overseas imports and accomplished through supporting the long-term viability of farming and innovative agricultural solutions and technologies.

Now is an opportunity to engage and a lot is up for grabs. Businesses and investors should use this window to advocate for their priorities and influence policy development at both a ministerial and government official level.

If you’d like to discuss this in more detail, including how GK Strategy can support you with government relations and communication, please contact James Allan.

• : *I have permission from the copyright holder to publish this content and images.