AI, energy and R&D among the winners at Rachel Reeves’ Spending Review, while overall funding at Defra will be cut back
The budget for food, environment and rural affairs will be cut by 2.7 per cent under the new government spending review, announced today (11 June).
Chancellor Rachel Reeves outlined government budgets for spending between 2028-29 and capital investment until 2030, with the main increases for the NHS, defence and energy.
The department for food, environment and rural affairs (Defra) will have its budget cut by 2.7 per cent, though it has received significant increases for spending on flood defences.
In comparison, the Home and Foreign Office budgets was also cut (-1.7 and -6.9 per cent respectively), while science, innovation and tech increased its share by 7.4 per cent, with government investment in R&D set to reach £22bn a year by the end of the period.
Future spend at Defra will prioritise technical efficiencies, legacy IT challenges and AI, to reduce costs of regulation and streamline the delivery of grants.
NFU president Tom Bradshaw has “cautiously welcomed” the fact the overall agriculture budget has been protected against rumours of significant cuts.
“I am pleased the government has listened, and credit should go to Defra Secretary of State Steve Reed for his work in maintaining a budget against such a tough financial backdrop,” he said.
“However, many big questions still need to be answered. In this age of insecurity, will this government now recognise that food security is a critical part of national security?
“How will the government realise all of its ambitions for the natural environment with a budget that’s been cut in real terms?”
Reeves also confirmed the previously set £2.7 billion per year budget for sustainable farming and nature recovery from 2026‑27 until 2028‑29, as well an average of £2.3 bn through the Farming and Countryside Programme and up to £400 million from additional nature schemes.
This includes increasing spend on Environmental Land Management schemes from £800 mn in 2023-24 to £2 bn by 2028‑29, which the government said will make a significant contribution to Environment Act targets, like improving water and restoration of biodiversity.
Soil Association director of policy, Brendan Costelloe, said: “The farming and nature settlement will have been hard won by Defra ministers, but it still amounts to real term cuts and it will now be even harder for the government to reach its environmental targets.
“We want the government to treat food system transformation as seriously as it treats the green energy transition. This means continued support in SFI for regenerating soils – the ‘renewable energy’ of the food system.”
Elsewhere in the review, there was £2bn more for investment in artificial intelligence and an increase in funding for the state-run British Business Bank, which provides loans to small businesses, including growers and farmers via its partnership with Oxbury.
But Tina McKenzie, policy chair of the Federation of Small Businesses (FSB), said small businesses “will be wondering when they will feel the benefits of today’s Spending Review”.
“As spending allocations were announced, decisions over how that money would support small businesses were not included,” she said.
“Increased Statutory Sick Pay came without help for small businesses to afford it; extra money for housing and defence came without a commitment to include small firms in the supply chain; new energy efficiency funding for households came without equivalent help for small business premises.”
