In a bid to ease tensions with farmers over recent inheritance tax changes, Labour has unveiled plans to encourage the public sector to source more British-grown food. The proposed reforms, led by Environment Secretary Steve Reed, aim to prioritize homegrown produce for schools, hospitals, and prisons, offering a significant financial boost to farmers struggling with the government’s inheritance tax policies.
Reed’s proposal, which is part of a broader overhaul of public procurement policies, seeks to ensure that at least half of all food purchased by the public sector comes from UK farms that adhere to high welfare standards. This move is designed to benefit British farmers by giving them a competitive edge in securing government contracts, particularly in the £5 billion public-sector catering market.
The reforms are expected to provide a much-needed financial lift to UK farmers, who have been adversely affected by Labour’s so-called “tractor tax” on inheritance. These changes are seen as a peace offering to farming communities, who have voiced strong opposition to the Chancellor’s decision to limit current inheritance tax exemptions.
Steve Reed, in a speech scheduled for the National Farmers’ Union (NFU) conference on Wednesday, will emphasize how the policy changes will help struggling farmers. “The Government is committed to using its purchasing power to support British produce,” he said. “This means buying more British food where we can, helping farmers secure a fairer share of the £5 billion spent on public-sector catering contracts annually.”
The reforms, developed with input from Pat McFadden, the Chancellor of the Duchy of Lancaster, aim to rewrite public procurement rules to favor high-quality food produced under British welfare and environmental standards. The changes would make it easier for UK farmers to compete with foreign suppliers, especially those shipping cheaper goods into the country.
Although the UK cannot mandate that the public sector exclusively buys British food due to international trade obligations, Reed’s plan sets a target for at least half of all public-sector food purchases to come from suppliers meeting high welfare and environmental standards. This should generally benefit UK farms, but could also open opportunities for European producers, as the UK and the EU maintain similar animal welfare standards post-Brexit.
The public sector spends approximately £5 billion annually on catering contracts for schools, hospitals, and prisons. Under the new rules, British farmers will be in prime position to secure £2.5 billion of that business each year. While the exact percentage of this market that currently goes to British producers is unknown, Reed has pledged to start collecting and publishing data to ensure transparency and track progress towards the 50% target.
The announcement follows recent anger from farming groups over the government’s inheritance tax policy. The Treasury rejected proposals from the NFU and other farming organizations, who suggested a compromise mechanism that would protect family farms from the inheritance tax impact while still raising government revenue. The proposals were dismissed during a tense meeting with Treasury and Department for Environment officials.
The government’s controversial inheritance tax changes, unveiled in the autumn Budget, mean that farms valued over £1 million will be required to pay inheritance tax for the first time. The tax will be levied at 20% on assets above this threshold, with farmers given the option to spread the cost over a 10-year period.
Despite the backlash, Reed remains confident that the new rules will offer a better deal for farmers. “Even with these changes, farmers will still get the best deal of anyone,” he told The Telegraph.
The proposed changes come as thousands of farms are reportedly closing down in response to the looming inheritance tax reforms. With the closure rate for agricultural businesses now twice as high as the opening rate, the impact on the farming community is becoming increasingly evident.
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