Chancellor urged to prioritise food production in Spring Budget

10 March 2023

NFU President Minette Batters in a harvested field

In a letter to the Chancellor ahead of the Spring Budget, the NFU has called for greater support for domestic food production as energy, fuel and other production costs continue to soar.

The letter, sent by NFU President Minette Batters, reinforced the need to extend the Energy and Trade Intensive Industries (ETII) scheme to include energy intensive sectors such as horticultural and poultry production. It also called for an extension to the current reduced rates of fuel duty, including for red diesel, and for improved support for capital investment, which would help alleviate costs for farm businesses and drive crucial investment to enhance productivity.

Commenting ahead of the Budget, Mrs Batters said: “At an NFU reception in Westminster in December, the Chancellor recognised the ongoing challenges of producing food in Britain, and we are now seeing the impact of these challenges play out through contraction across all sectors. If the government is to halt food price inflation and help prevent further food shortages, greater support and confidence is needed for the thousands of farm businesses which are trying, but struggling, to feed our nation.

“It seems irresponsible that the ETII scheme completely overlooks primary food production, not to mention it being wholly at odds with the government’s own ambition to produce more home-grown fruit and vegetables. An urgent review into the ETII is needed to ensure that essential and vulnerable food producing sectors, such as protected horticulture and poultry production, do not face a cliff edge when the Energy Bill Relief Scheme ends later this month.

“Improving support for capital investment and extending the reduced fuel duty rates would also give farmers and growers across all sectors greater confidence, especially as the cost of red diesel remains almost 40% higher than it was last April.”

More information

On support for capital investment, the NFU is calling for the Treasury to extend the Annual Investment Allowance to structures and buildings or increase the general rate for structures and buildings to 10%, to encourage small business investment in UK agriculture.

The NFU is also asking for a delay to the implementation of Basis Period Reform for business with accounting periods that don’t align to the tax year, and amend the date from which interest is charged on additional tax resulting from the reform from when that payment is due.

Information about the heated greenhouse sector:

  • Energy can typically be half the cost of production of fresh salad products.
  • British tomato and cucumber production is expected to fall to the lowest levels since current data recording began in 1985.
  • Sweet pepper production has been a real growth area for the UK over the last 25 years (175%). Much of this growth is now at risk due to costs and viability.

Information about the poultry sector:

  • NFU analysis shows that, typically, a poultry producer spends 2 pence per bird on energy. This is now in the region of 10p per bird and has been as high as 25p. This means that farmers’ margins per chicken, typically less than 7p per bird, have been wiped out.
  • As a result, less than 38 million chickens are currently in the laying flock at the moment – down 13% v 2019 and before any allowance is made for the impact of Avian Influenza.
  • Cost inflation (especially feed) has dwarfed any price increases to date – forcing producers to reduce capacity.