Rural Economy

Lord Roborough Excerpts

Thursday 19th December 2024 Lords Chamber

[Lord Roborough (Con)]

My Lords, this has been a well-informed and wide-ranging debate at a time when the core of the rural community, the farmers, are feeling betrayed by the reduction in inheritance tax relief, putting the long-term survival of up to 75% of working farms at risk. The right reverend Prelate the Bishop of St Albans, to whom we are all most grateful for securing this debate, addressed the importance of growing the rural economy and made many excellent suggestions, alongside other noble Lords. Before I address the rural economy, I will start with the wider economy.

The overall UK economy is challenged by this Labour Government, so how can the rural economy grow? It is deeply depressing that we in government had finally got the economy on an upward trajectory, with inflation falling, GDP growing and real wages expanding after the disasters of Covid and the Russian invasion of the Ukraine. This Government were elected with a commitment to kick-start economic growth, with the explicit statement:

“A new partnership with business to boost growth everywhere”.


Since winning the election, the Labour Government have talked down the economy, leading to two months of GDP shrinking, and then delivered a Budget that disincentivises investment in family businesses and employment. The S&P Global flash UK purchasing managers’ employment index now highlights shrinking employment and was the worst reading since 2009, excluding Covid, when Labour was last in power.

The Government plan to increase spending funded by tax increases, but also underpinned by economic growth assumptions that now look flawed. The UK 10-year gilt has sold off to 4.6%. The last time the yield was so high was also under the previous Labour Government in 2008. Given that we brought inflation down from its highs, this can only be as a result of reducing confidence in the Government’s economic management increasing the Government’s borrowing costs, putting further pressure on the Budget.

Economic growth has been undermined by this Government, whose spending plans look increasingly unfunded by available resources. The Chancellor of the Exchequer recently went on the record saying that there would not be further tax increases in the spring and that, if her fiscal rules are broken, she will cut spending to meet them. From the evidence we have seen of above-inflation public sector pay increases and increased spending, that would seem to be wishful thinking. I ask the Government: what spending will be cut to balance the books? Can the Minister reassure us that this will not impact on Defra budgets and existing spending commitments?

On the rural economy, I declare my interest as a dairy farmer, an owner of rural property and businesses, and an investor in a number of businesses that provide goods and services to farmers and land managers. I also declare my residential and industrial building interests and renewable development interests. The rural economy is reliant on farming and family businesses, where the reduction in IHT reliefs will reduce investment, as the noble Lord, Lord Carrington, amply demonstrated. Without needing to repeat the many arguments against this tax, I will just highlight that CBI Economics estimates that it will reduce economic output by nearly £10 billion, cost 125,000 jobs and lead to a net reduction in tax receipts of over £1.2 billion. I put it to the noble Lord, Lord Livermore—the Minister in the debate brought by the noble Earl, Lord Leicester—that, given the destructive impact of this tax and the misery it brings, it is either ideology or a mistake. I hope it is a mistake and that the Government are big enough to concede that and reverse or heavily revise it.

We left an unspent surplus in the Defra budget in the 2023-24 fiscal year, as farmers were slow in their take-up of ELMS and capital grants. That should have allowed the increased application rate for ELMS and capital grants to be easily accommodated in this year’s budget. However, the Government have now stopped applications for new capital grants in the current year and delayed applications for the Countryside Stewardship higher tier until the middle of next year. The farming community does not believe that this Government really are interested in championing British farmers, no matter that the Minister sitting opposite me is clearly understanding, sympathetic and supportive.

As I have discussed in previous debates, the rural economy has a significant growth opportunity in being part of the solution to climate change and nature restoration. Changes in land management over decades, centuries and millennia are blamed for up to 30% of anthropomorphic carbon emissions in the pursuit of cheaper food. The process of cutting those emissions, restoring nature and turning land back into a carbon sink requires funding. ELMS is an important segue into introducing private capital into these markets, to which this Government have previously restated their commitment. On this point, I thank the Minister once again for listening to my noble friend Lord Gascoigne and other noble Lords and for including greater incentives for nature-based solutions in the Water (Special Measures) Bill. I hope this will be a catalyst for more private sector investment in natural capital.

Private capital will need high-integrity standards to govern its investment in carbon sequestration and nature restoration. Can the Minister update us on the likely timing of the woodland carbon code and peatland carbon code accreditation into the Integrity Council for the Voluntary Carbon Market’s core carbon principles? Further to that, has there been any progress in the consultation around the entry of woodland carbon code units into the UK emissions trading scheme? Encouraging the development of these activities creates significant employment and new business opportunities. The right reverend Prelate mentioned the Groundswell festival and my noble friend Lord Gascoigne mentioned Nattergal, but I also highlight many other businesses developing in this area, such as Forest Carbon and Agricarbon, in which I disclose a shareholding, as well as many others.

Joined-up thinking and policy delivery between the various parts of government, departments and local authorities will be critical for stimulating the rural economy. This was highlighted by the right reverend Prelate the Bishop of St Albans, my noble friend Lord Harlech and the noble Lord, Lord de Clifford. Defra does not have the power to address all the areas that have been mentioned in today’s speeches, but it does seem as though responsibility has been devolved to it from other departments that do have the power. In that light, it is depressing that the over £100 million rural services delivery grant has been repurposed away from rural areas in the draft local government finance settlement, published today.

It is also concerning that the planning statements appear to dramatically increase the rate of housebuilding in rural areas, with urban centres under much less pressure. It seems in vain to ask the Minister how she can reassure the House that the rural economy will be given the support that it needs, when it seems that policies and funding are targeted at towns and urban centres—but I ask anyway.

The House continues to eagerly await the land use framework. Can the Minister update us on timing? The Government’s various commitments will require more rural land to be developed for renewable energy, housing and infrastructure projects. Can the Minister reassure the House that the land use framework is not intended to be prescriptive but to be guidance for changes of land use that will streamline the planning process and help land managers to make good decisions with their land?

When we take together the reduction in IHT relief for family business, delayed capital grants, delayed Countryside Stewardship higher-tier schemes, repurposing the rural services delivery grant and dramatically increased rural housing targets, as well as the cuts in the nature-friendly farming budget, mentioned by my noble friend Lord Harlech, it is hard to dispute the claim of my noble friend Lord Fuller that this Government would appear to be at war with the countryside.