Good afternoon, everyone, and welcome to this oral evidence session of the Welsh Affairs Committee. My name is Ruth Jones; I am the Member of Parliament for Newport West and Islwyn and the Chair of the Committee. I am delighted to introduce the first session of the inquiry into farming in Wales in 2025, which is all about the challenges and opportunities that it faces. Today, we will be hearing from three of our largest groups representing farmers in Wales. I ask members of the Committee whether they have any interests they wish to declare.

I am a dairy farmer from Carmarthenshire, so we have a dairy farm there. We also have a farm diversification business, and I am a chair of the FUW in Carmarthenshire.

My parents and my brother own and run an 895-hectare mainly arable farm in Gloucestershire. My parents also own 10 hectares in Pembrokeshire, which they let out to a local farmer. I have no financial interests in either of those holdings. Just for the sake of clarity, my father is a non-executive board member of Natural England and is the chair of the Royal Agricultural Society of England, and he was previously president of the Country Land and Business Association and non-executive director of the Animal Health and Welfare Board for England.

Fine speech, Henry.

Well, just for the sake of transparency and accountability—there we go.

Absolutely; it is really important. Thank you very much for that: we do appreciate it. May I ask all three witnesses for a line of introduction about who you are and who you represent, please?

It is a real pleasure to be here. I am Aled Jones, president of NFU Cymru. I left home early this morning, and it is still beautiful; it is a shame that we cannot have the Committee back home in Wales. I have a dairy farm. I am the eighth generation farming. My son is now running the farm, and hopefully the grandchildren will as well.

It is great to be here as well; thank you, Chair. I am Gareth Parry, head of policy for the Farmers’ Union of Wales and an Aberystwyth University graduate. I have been with the union almost six years. I married into a family farm: dairy, beef and sheep. As typical family farms go, that is it, so a very big, important agricultural background.

As the previous witnesses said, thank you very much for having us. I really appreciate being in the room with you today. I am slightly different: I am from a non-farming background, originally. I sort of fell into farming and Young Farmers on accident, but it was a happy accident. I am here on behalf of Wales Young Farmers. More specifically, I am the chair of the rural affairs committee for Wales YFC. I am currently working on a beef and sheep holding in Usk, south Wales. We are also going into a diversification project of spring and sparkling water, and getting that up and running. Due to the current climate, it is quite an interesting thing to have for us to diversify the farm.

I thank all three of you for coming before us in person. It is really helpful to have you here in the room with us. How would you describe the situation for farming in Wales in 2025?

Things are extremely mobile. Quite a number of things are ongoing. Since the referendum result on Brexit, we have been in the throes of designing a sustainable farming scheme. That is still ongoing. Hopefully, we will have a scheme that we can be proud of. The rural community in Wales is extremely strong and, as you all know, that sense of community is embedded within the farming community. They look to us—the unions and the young farmers particularly—for leadership. I am pleased that you are taking this session, because it is so important. I cannot stress that enough. The wellbeing of the economy in Wales is intrinsically connected to agriculture. In terms of contribution, it is the largest employer throughout Wales with 230,000 people, not only in producing the food but in processing, distribution and everything. Some 17% of the workforce in Wales is employed in food and drink. Undoubtedly, it is the strongest, with a £9.3 billion economic output. That message has to be embedded as we go forward. The title of this session is “Challenges and opportunities”, so I hope we can have a bit of a balance on discussing both.

That is certainly our hope, too.

I want to provide a bit more context on the situation in which we find ourselves in Wales. We are seeing national declines in livestock numbers, and we cannot ignore that in the context of the matters reserved to the UK Government. We have seen record high livestock prices as a result of that over recent years, although they are starting to decline this year. When we see these declines in numbers, we have to question how sustainable our supply chains and red meat processors are, while also maintaining the consumer demand when prices are so high. That is then coupled with a clear appetite from the UK Government to sign trade deals, and we saw an increase in red meat exports as well last year as a result. Farmers’ incomes declined by 40% last year in real terms. That is a huge statistic and reflects the situation that we find ourselves in. I appreciate that these are devolved matters, but it is important for the Committee to understand that we are seeing continuous ineffective bovine TB eradication policies. Aled has alluded to the development of the future of farm support and there is still quite a great deal of uncertainty there, as there is around pan-Wales water quality regulations. The key message is that we have to deliver economic stability for our family farms, because the social and cultural contributions that they make will then follow naturally. The economic element of that is absolutely crucial. As we see it becoming more difficult for countries across the globe to produce their own food due to climate change impacts, conflicts and so on, the value, and particularly the societal value, of our ability to produce our own food sustainably in Wales and the UK will increase. We need to see both the UK and Welsh Governments championing the agricultural sector’s ability to continue to produce sustainable food. Both Governments have to work really closely together to deliver that.

Dominic, from a young farmer’s perspective, what are the challenges facing the farming sector?

It was very well put by the two previous speakers, so I will have a job to top that. Certainly, from a young person’s point of view and a young farmer’s point of view, it is a very turbulent time. We have the ongoing issues with inheritance tax and the uncertainty around that. The force of those impacts could lead to conversations about how the farm will be passed down and how that will be divided up, with the potential loss of ground due to tax bills that may not have been there previously, with the effects that will have on small family businesses within Wales. Through the Young Farmers movement, there is an opportunity for members such as me who may not have come from farming backgrounds originally. The task of becoming a farmer and starting your own business seems to be developing into a much tougher task than it may well have been previously, due to inheritance tax. We have touched on the SFS; I appreciate that that is a devolved matter but it is important for the Committee to understand that while that has a knock-on effect of opportunities, it creates a big challenge for young people as well as farmers who are currently in the line of fire.

I have a question for all three of you, starting with Aled. Many sheep farmers in Wales do not make much of a profit from their core farming activity. We saw stats saying that last year farming incomes fell. What steps should the UK Government be taking to sustain this part of the farming sector, and can it sustain any increased taxes?

The situation in Wales is that it is predominantly livestock‑based. Only 3% of the land area in Wales is used for arable, which inevitably means that we are livestock, in contrast to England, which is 30% arable. The emphasis on livestock production is crucial. Because of the nature of our disadvantaged areas, it is predominantly sheep on the upland areas. The Aberystwyth University farm business survey is the go-to place for background information on the current state of agriculture in Wales. It is good that we have these figures, but the decline in profitability of these upland farm areas is of concern because they are the only employer in those rural communities. If we find an erosion in the ability of those farms to keep livestock, maintain employment, and keep schools and churches going, that is of concern. Those are the cultural backgrounds that we have in Wales. I would add that 43% of those employed on farms or in agriculture have their first language as Welsh. Mae’r iaith Gymraeg yn parhau’n gryf a gobeithio y bydd yn parhau felly. There is also another issue. The red meat processors in Wales rely on a regular, consistent supply of livestock into their processing sites. These are extremely large employers. I stressed right at the beginning the intrinsic nature with the supply chain. The employment and the multiplication issue of making sure that there are jobs throughout the supply chain is crucial. Gareth mentioned the reduction in livestock numbers. It is a real concern. Without public support, many of these farms would not be viable. We will probably discuss the Budget discussions later on, but support of these farms is crucial. My long-term hope is that we will continue. Many years ago, these upland farms were the bedrock of Welsh farming, and I would not wish them to be eroded or policies to dictate that those lands are taken away for tree planting. I will just lay that here with you today, because we have to be very sensitive to the issues on policy design. The UK CCC recommendation on land use change is a concern to us, but these are farms. They might be marginal but they are still contributing to the economy. I am pleased by your question, because I guarantee you that there is a lot that needs to be thought about and designed in policy to make sure we protect these vulnerable areas.

I am sure we will have the opportunity to go into the finer details of the inheritance tax reforms. Just to note the final point of your question there, David, the predicted or modelled impacts of these tax changes on the agricultural sector are phenomenally significant. As my predecessor said to the previous Welsh Affairs Committee four years ago, any changes to inheritance tax reliefs will wipe agriculture out in one generation. They were messages that we were giving as a union four years ago. It is seriously concerning that that has come to fruition by now. The predictive value of farms will differ across different parts of Wales and the UK but, just to give some indication, on average the price of agricultural land over the last 20 years has increased by over 200%. Food prices have not increased by the same amount. We are in a position now where we have been fortunate to be under the EU CAP wing, if you like, through its common agricultural policy principles of supporting cheap food and ensuring fair incomes to farmers. Now, following the Brexit referendum, we are attempting to reshape agricultural policies in the UK—Wales, England and Scotland as well—that are effectively moving away from those core principles. You cannot just pull that rug from underneath farming businesses without providing them with something else to ensure that supply of food production. That is why, as I mentioned previously, the concern is that there is a clear appetite to sign trade agreements, which seems to be higher up the list than supporting sustainable food production in the United Kingdom. I will end on this point. Aled has just mentioned the Committee on Climate Change. There is constant messaging around a nature crisis and a climate crisis, and yet we do not seem to have any similar measure at a UK level to determine when we are in a food crisis. If you use supermarket shelves as your indicator, it is too late. There is a clear message here that there is a constant focus on climate and nature crises because there are indicators out there to measure them, and yet food production seems to be falling off the edge of that conversation.

I will elaborate a little more on something Aled said around the culture of Wales, certainly involving rural areas and specifically sheep farming and the decline in sheep numbers and meat producing numbers in general. From a young farmer’s point of view, those rural areas are dependent on Young Farmers as an organisation. For a lot of people, that might be their only form of socialising and interaction, with the opportunity to travel, talk to new people, see new businesses and open their eyes to a wider community. It is important for the Welsh Government and the UK Government to understand the importance of what we are trying to do here and the support network that is needed for Welsh agriculture to continue to thrive. Young Farmers will stay hand in hand with that. We are the next generation of farming in Wales and of course in the UK, and it is vital that that support is given to stock producers; as Aled said, we are predominantly stock-producing in Wales. That support is desperately needed and needs to continue, to allow agriculture in Wales to continue to thrive. We spoke here on the panel about the employment rate within Wales and agriculture. That has a massive impact. It is not just the loss of sheep; as Aled said, it is the abattoirs, and then it is the producers afterwards and the packaging. There will be a massive impact across the whole food-and-drink sector. It is a snowball effect that really needs to be managed from farm to fork. It is quite important.

From the latest figures of the Aberystwyth farm business survey, the average income of upland hill beef and sheep farms was £22,000. That is below the national minimum wage. The average for lowland cattle and sheep was £23,000. We have to bear in mind that these people are living on quite low incomes and yet—this is the amazing part—they would not wish to do anything else. They love their work. They are committed to their farms. That connection is so crucial. To touch on what Gareth said, if they find that they fall into the IHT bracket of having to pay—and I know full well, having done analysis through several companies on the asset value of farms, that they most probably do—their ability to pay would not be there, and that would be devastation. Then, to link in the stratified nature of Welsh farming, the upland farms support the lowland farms. With the hill sheep, they breed the replacements, they gradually come down and they are cross-bred. That linkage between hill and lowland is so crucial. That is a delicate fabric that we have to protect and cherish.

In my constituency, I have been very fortunate to see the sterling work that Brecknock YFC and Radnor YFC do. Dominic, what types of support do young or new entrants into Welsh farming require from the UK Government that is not currently being offered? What would you say is the typical route into farming for young farmers?

I was always told, when I joined Young Farmers—as I say, I come from a non-farming background—that the way I would get a farm is to marry one, which is not ideal and is not always the way that you want to build a business. I am certainly not the type of person who would like to do that. I am quite stubborn; I like to do things myself. If I can build a business myself, that is certainly what I will do. As you say, Young Farmers gives people an absolutely amazing opportunity to develop all sorts of skills. I could talk to you all day about the things I have learned and done through Young Farmers in my time, but the key thing that we need to work towards is giving opportunities for younger farmers. We can go through the stats of the age of the average farmer, which I think is 59. The percentage of farmers under 35 is extremely low. There needs to be something from, certainly, the UK Government to encourage and nurture the young talent that we have within Young Farmers into those roles. That might be through funded encouragement to the older generation of farmers looking to have someone new on the farm. We talk about share farming and all those sorts of things. There is a big key in that that will strengthen UK farming, and certainly Welsh farming, if the opportunity is there and if it is done correctly. It is about taking those chances as farmers look not to retire, but certainly to take a step back. It is about educating farmers to see that it is not the worst thing in the world to let someone new come and have a go. That is certainly something that the UK Government should be pushing towards. We have talked about land prices shooting through the roof: 200% in 20 years is quite astronomical. I do not know, off the top of my head, of anything that would have risen quite that well. The UK Government need to look at things such as that to try to support the next generation.

You are really knowledgeable expert witnesses. Can I just make a plea for brevity? We have a lot of areas that we want to go into today and I do not want to miss any.

Can I thank the three of you for coming here today? Mae’n wych cael eich cwmni. It is so great to have your company. We have touched on the LFA. It is really difficult to make a living on the LFA land that we have in Wales. Two-thirds of our land is LFA. As Aled has already said, the average income is about £22,000. A lot of agriculture is devolved to the Senedd, but what can we do here in Westminster? What policy changes do we need to make here in order to make farming more profitable in the two thirds of Wales that is within LFA land?

It is a very good question, Ann, because clearly we need to respect devolution as well, so there needs to be that clarification. The big selling point for us, which we were reminded of a number of times ahead of the general election last year, was that having a Labour party on either side of the M4, in both Welsh and UK Governments, would provide that opportunity for closer working relationships. Now, to date, the amount of collaboration between the two Governments on policies such as inheritance tax is questionable. The engagement we are having with the Welsh Government has improved dramatically over the last 12 or 18 months, particularly in the space of the sustainable farming scheme, and yet we have seen UK policies such as the changes to inheritance tax that have brought the big raincloud over the top of that. Comments have been made by Welsh Ministers around their disappointment with the way that that has been approached while they are trying to make amends from a devolved perspective. Profitability is an interesting one. The funding that the UK Government provide for agriculture, notwithstanding now that it comes under the block grant, is no longer earmarked for agriculture but is effectively included in the block grant as a replacement for funding that we used to receive under the European Union. That funding is absolutely crucial to provide the Welsh Government with the means to provide that support in future. What we have lost since the Brexit referendum is confirmation of the seven-year multi-annual funding frameworks that we had under the European Union, so we do not have that long-term certainty any longer. We are stringing along between annual budget settlements, which provides no certainty as to what that funding will look like for a long period. We have also lost that agricultural policy framework, which, under the European rules, provided all European nations and member states with a framework to work within. All states—Wales, UK, and every other member state—had to work within those boundaries, but they could make sure that those funding streams fit the nation’s priorities. We no longer have that sort of direction. While we have different UK nations now going in different directions in terms of agricultural policy, there is that risk that we start to see further divergence in terms of agricultural support.

As Gareth said, that funding is the fundamental part of what we can do to alleviate any issues. The Welsh Government’s devolved status does make things a little tricky. As they are fighting one fire, the inheritance tax is certainly a much greater issue that has not helped situations there. The clarity around that and where we fall is quite important. The option of having a conversation around inheritance tax would be more than welcomed to encourage people to understand where they lie. We have talked about land prices and things, and understanding the repercussions of what will happen. It would be crucial for us and for yourselves to understand the effects of inheritance tax on small businesses, and ringfencing some funding is key to allow the Welsh Government to support our industry.

The Chair has asked us to be brief, but unfortunately this is a very difficult question to answer briefly, so I will not repeat some of the things that Gareth and Dominic have said. On the Budget side, we were extremely disappointed that any future uplift in the Budget will be Barnettised because, when Budgets were allocated in the past, they were based on productive capacity. Any Barnettisation based on a population equation would severely disadvantage Welsh farming. I hope we will come back to AHIC later on. What I would add is on trade implications, which are within your powers here in Westminster.

We will come on to that shortly.

I am pleased. Our need to be able to access markets, be they home markets or other markets overseas, is absolutely crucial. We are probably more reliant in Wales on the EU markets than the whole of the UK. Probably 75% of our exports would be to the EU. Compare that to the whole of the UK and it would be nearer 57%. That underlines the crucial nature of trade for us. One thing I would also add is on supply chain trading fairness and GSCOP, which we might touch on as well. The Fair Dealing Obligations (Milk) Regulations are undoubtedly a model that we need to be working on. That demonstrates very clearly, within the whole supply chain, where that fairness works its own way through. We can actually go further. There is not only the dairy but the poultry side, as well as other industries that we can bring into that framework with the ethos and the values that are embedded within that piece of regulation. Fundamentally, those are the areas, devolved to yourselves, which are crucial for us.

My apologies for being late. I have two quickish questions that, I hope, may meet the Chair’s strictures of quick answers as well. UK agriculture and food production are in a very competitive marketplace internationally, for both export and import markets. Is there any merit in revisiting the wider devolution settlement when it comes to agriculture, to have more of a cohesive UK approach? Picking up the point on IHT, UK pensioners and supporters have been incredibly effective in apparently delivering a Government U-turn on the winter fuel allowance. There is a huge and growing canon of evidence on the unutterable daftness of the IHT proposals when it comes to farms. What else do you think Welsh and, by definition, British farmers and food producers can do to get Government to perform an elegant U-turn on IHT, just as they appear to be performing on winter fuel allowance? Is it depleting supermarket shelves of food so that the urban customer, well divorced from rural Britain and rural Wales, actually sees for themselves, when they go through the door in Bristol, Southampton or wherever it may happen to be, that this is the effect of increasing food insecurity by reducing the capacity for production?

To try to answer your first question, Simon, the European common agricultural policy framework provided that sort of unilateral framework for all nations to work within, but it provided the boundaries as well, and that no longer exists. I know we have the Agriculture Act in the UK and the Agriculture (Wales) Act, but in theory there is nothing really stopping any sort of divergence in how agricultural policies are delivered in each of the UK nations, so straightaway there is a risk of that divergence. Whether it needs to go as far as re-looking at the devolution settlement is questionable, but there is that link missing, where we have come out of the European Union and now devolved nations are at liberty to design their own policies based on their own priorities. We have previously raised, and we may raise later, the competitiveness with other nations across the world but, depending on how policy is developed across different nations within the UK, we might even see different divergence there, so there is definitely scope to look at something like that. To touch on the example that you gave about the shortening supply of food on shelves, many farmers, particularly in Wales, do not have the liberty to do so. They rely so heavily on the contracts that they may have for their milk buyers or their red meat markets. For something like that to be a success, every single farm has to be on board with it, but, as I said, profit margins are so tight on farm businesses at the moment that the risk involved is quite significant. On behalf of the FUW, I would not recommend it unless there were a clear mandate for all farm businesses across the UK to be on board with something similar. The other players within the supply chain, such as the processors, would also need to be on board. On IHT, members of the Committee may be aware of the report that came out on Monday from Family Business UK about not necessarily the number of estates that could be impacted by the policy, but the wider economic impacts that it could have on the UK economy, with a loss in gross value added of nearly £15 billion over the next five years; over 200,000 jobs lost; and a net fiscal loss of £1.9 billion to the UK Treasury. Those figures bring into question whether that would end up in an industrial crisis, because this goes further than agriculture; it is across all family businesses across the UK. There is clear analysis to show that His Majesty’s Treasury has not considered the wider societal and economic impacts of the policy; it has simply used simple calculations on figures that it had available. To date, the Treasury has shown no willingness at all even to acknowledge the concerns of the sector in this space. The way in which it has slammed the door in the industry’s face and thrown away the key is not the way any Government should run on a policy that is so controversial. With such clear analysis now available, there is a real question about how long the Treasury can continue to ignore these analyses before it has to acknowledge that there is an issue with the policy and come to us and all the other sectors that will be affected to work on a fair policy and a way forward.

We need to be brief, because we have a lot more questions.

May I just finish this point? Whether Committee members agree or disagree with the policy that has been proposed, we can guarantee that there will be a certain number of farmers and other business owners of a certain age or of permanently ill health, for instance, who will fall foul of the policy and will have nowhere to turn. No amount of advice can get them out of this situation that they find themselves in. It is morally incorrect to allow them to face this policy with absolutely no other option on the table to make alternative arrangements. At the absolute least, we are calling on the UK Government to consider transitional arrangements for those people, who find themselves in a really difficult position.

Thank you, Steve, and also for your presence at the meeting last week. It probably carries on from the previous question, because we have seen a serious erosion of confidence among family businesses. It is not only on farms; processors likewise are basing their long-term decisions and investments on the ability to have the raw materials that they require coming into their sites to keep the employment. Even the major retailers are asking questions like “What is the long-term security of supply of home-produced food, which many of our consumers are asking for?” The trust that we have from British consumers is second to none. On Welsh farms, we were totally deflated come the last Budget announcement. Leading up to it, we were buoyed up, because of the messages on the intrinsic connection between food security and national security. Farmers were really buying into that. Historically, during the war years, this country stepped up to make sure that food was produced. Just to link into an announcement that came from this House earlier this week regarding the uplift on defence budgets, yes, protecting ourselves is so important, but let us make sure that we feed ourselves as well, with home-produced food. As for the implications, I have touched on the issue of confidence. The ability or the ambition to invest in the future has to be crucial. Any businesses that step back from reinvesting in their business will probably find that their ability to be productive and to invest in environmental projects will decline very rapidly. It is difficult to be brief—forgive me, but it is so important that we get over this. The EFRA Committee’s unanimous decision was to call on the Government to delay the changes to the inheritance tax until October 2026 for implementation in 2027. That is a very sensible call, simply because an impact assessment has to be undertaken of the impact on national food production ability, food security and the ability of the industry to pay, not to mention the impacts it is having on some of our elderly people who happen to have farms tied to their names later in life. They are facing some very serious considerations, at a time in life when they are finding it very difficult. I would urge compassion from the Westminster Government to consider these very real issues. They are extremely sensitive, and I do not have to repeat the ongoing coroner’s case presently. There are many other instances as well, and it really saddens me to think about some of the things that we have to face up to.

I will keep it very brief, because I appreciate the time I took in the previous answer. From our initial assessment in the FUW, we have estimated that up to 48% of basic payment scheme recipients in Wales could be affected. That is a rough assessment; we are not trying to say that it is a perfect assessment, but our analysis and the analysis of other bodies bring into question the Treasury’s own figures on the impact of these policies. The figures that came out on Monday go far broader than the analysis that we have seen to date. They model the wider impact on the UK economy as a whole: the secondary and tertiary impacts due to less investment, loss of business trading, and various other things. It really does raise the question of the impact this policy will have on businesses, but the implementation of this policy will also cause a fiscal loss for the Treasury, so it is actually a lose-lose policy for all. I see that the Treasury has claimed on many occasions that this policy is fair, but I would question for whom. Based on the figures we have seen, it does not work for anybody.

We have touched on the financial side of things there pretty well, so I will not go over that again. One of the things that most stick out to us in Young Farmers, certainly at the moment, is not only the pressure that this is putting on the older generation of farmers with farms in their name, but the conversations that are now having to appear much sooner in the farming business than would ever previously have been planned. The way things were previously, it would all sort of take care of itself, but now we are being forced into awkward conversations and difficult times for farming businesses in Wales, and having to get over some quite tricky hurdles in terms of who has the business and when, and those sorts of things, which make things very difficult. Around 50% of farms within Wales are a tenanting ground of some sort of description, whether that be the whole farm or patches of ground. As we have alluded to, the figures there are £22,000 for an income per farm. The loss of that tenanted ground can cripple a business. Farmers will be going out of business left, right and centre if tenants are forced to take that back to sell that ground off as a way of paying inheritance tax.

I would add the analysis undertaken by the Central Association of Agricultural Valuers. It has gone into a lot of detail in its assessments. Some 200 farms per year would be impacted by these changes. Northern Ireland has undertaken a similar study, with a similar figure of 200, so you already have 400 farms in two of the smaller nations in the UK. Then the Treasury analysis was showing that 500 farms would be impacted, which is 27%. We have some grave reservations regarding the analysis that the Treasury has undertaken. We believe that there is a flaw within its assessments. That is one of the reasons why the EFRA Committee asked for a pause to assess the implications long term. Going back to Wales, Dominic and Gareth have mentioned that the ability to pay is certainly not there. The Aberystwyth figures bear that out. The ability of generational transfer is being particularly stressed at the moment. We are having so many conversations with families who are going through some very difficult conversations, particularly when there are older members who are at a stage in life at which they are finding it very difficult to deal with these issues. Planning generational change is incumbent on all of us, but the announcement last October has thrown a lot of these family businesses into turmoil. Again, I ask for compassion for these people, who need to be taken away from the eye of the storm. We have offered the Treasury an alternative route: a system that is operational in other European countries that will cover this. We have gone through the figures, and that will offer the Treasury an equal amount of income coming through, but it would take those vulnerable people out of the eye of the storm. Farmers view the land not as an investment, but as a trading asset. It is not something to trade and uplift in value as a measure of avoiding taxation; it is simply a trading asset. The principle of taxing an asset that enables you to create an income, to employ people and to invest is wrong, to be perfectly honest with you. For that reason, we have asked the Treasury to engage with us. Unfortunately, we have put a freedom-of-information request to the Treasury asking why it is not consulting with us, but we have not had any replies except that it would not release the information because that was not in the public interest. I question that.

A number of our members have come to us to seek advice on this. We have held seminars with tax advisers to try to provide as much information as possible. Farming Connect in Wales has also been providing succession planning workshops and various other things. Again, I just wish to highlight to the Committee that there are those who find themselves in a position where no level of advice gets them out of the hole. That is arguably the really unfair part of this policy. It is morally incorrect that this policy attacks those individuals. Our policy is not to scrap what is on the table. All we want is a door open for us to be in the room to negotiate a fair way forward that works both for the industry and for the Treasury. The opportunity to have that discussion is not there at the moment.

We have talked a lot about the data already. Aled, you talked about a flaw in the data presented by Treasury in respect of its estimate that about 500 estates claiming relief would be affected annually. You referred to the Central Association of Agricultural Valuers. Gareth has talked about the evidence to the Committee about up to 48% of basic payment scheme recipients. I wonder whether you could go into a bit more detail about where you see the flaws in the Treasury data.

To answer this correctly—this is a very technical answer—you undoubtedly have to go back to the figures. The Treasury is correct to say that 27% would be impacted if it is solely looking at APR, but nearly all businesses employ APR and BPR. It is only when you bring the two together that we get to the figure of nearly 75% of farming businesses that are impacted. That is the fundamental flaw, and that was the question that DEFRA itself found difficult to answer on the morning after the Budget announcements, so we had two Departments within Westminster that were not in agreement. That has been borne out by the Central Association of Agricultural Valuers. Ex-Treasury officials and OBR employees have done the assessment, and they come to a similar figure as well—plus which, they are working on 2022 figures, and we know full well the impact of inflation and how quickly it moves. It is frightening. Granted, the cost of rearing these livestock is particularly high, but your asset value all of a sudden has gone through the roof, yet you still have to create a living from that asset. As Dominic says, and I am sure that Gareth would say the same, for the value of our livestock that we sell, we have not seen anything like it. It is quite daunting, to be honest with you, when the bills come in at the same time, but I would not have it any other way. We will strive on, but I hope, Henry, that you can pursue these questions. If it does come out in an impact assessment—that consultation will be forthcoming from the Treasury—it will be a breath of fresh air. All we require is to have an assessment and to understand the implications throughout the country: a £200,000 loss, potentially. Family Business UK has gone through a lot of figures here. The drop in confidence levels is something we have to be aware of. The Prime Minister has said that you cannot tax yourself to growth. Well, I would say that I agree full-heartedly. Reflecting on those words, there must be a better way of drawing in income to the Treasury, which we dearly need, because we all need to invest in our social services, health and education. It is incumbent on all of us to contribute, but contribute when the money is there.

I should clarify that the analysis that you referred to from us is just on APR, not both. The big thing for us is that, whether the Treasury figures are correct or not on what it has actually analysed, they are based on simple calculations. It clearly has not taken into account the wider economic impacts that Family Business UK has come up with in terms of loss of business, loss of jobs, loss of investment and what that then results in, in terms of the UK economy. That is clearly quite a big omission from the Treasury’s figures. We have the Well-being of Future Generations (Wales) Act, which requires the Welsh Government to consider the social, cultural and economic impacts of any policy that goes through the Senedd. Those factors have not been considered in the space of this policy. Granted, it is a UK policy that is being considered, but then there is a refusal from the Welsh Government to do a Welsh impact assessment to take into account the factors of the Well-being of Future Generations (Wales) Act. In a sense, we have fallen between two stools, because those social and wider cultural factors to which we all alluded at the beginning of this session, and how important they are to Welsh agriculture, have not been taken into account when these economic analyses have been done.

We talked about the EFRA Select Committee reports. I sit on the EFRA Committee and, in terms of endorsing those recommendations, I wonder what the position is from FUW. Have you seen the report and the recommendations? What is your view of them?

Yes—briefly, I must admit. We are all for supporting a delay in the policy, but in theory, for these transitional arrangements to be provided for those who fall into the trap, in a sense, that transitional arrangement would effectively have to be in place for seven years for the exempt transfers to phase out. A 12-month delay would be supported by the FUW, but that time would have to be used correctly.

I have a very straightforward question. We have a lot of Government MPs in the room. What steps should the UK Government take to ensure that any inheritance tax reforms do not negatively affect people wanting to hand down the farms? Should the family farm tax be scrapped?

It ties quite nicely into the previous questions, but I think Gareth and Aled have alluded to it. We are asking for an opportunity to have a discussion around this. We have not had that, as yet. The big take-back, and something that UK Government really need to consider, is that we need to have a conversation around this. We have touched on the figures and the implications that both the FUW and NFU have found, and I can tell you all day long about the impact it will have on young farmers from a cultural perspective, as well as the well-being Act, as we have covered. As we have said, it certainly needs to be paused, looked at and discussed to really do this correctly and to stop the destruction of agriculture in the UK.

I refer to it as the inheritance tax reforms, because the BPR and APR reforms are broader than the family farm tax. Should it be scrapped? We would say no. We want an opportunity to work on a better way forward in this space, in terms of when the tax should and should not apply when we speak about agricultural purposes, from our perspective at least. Does that mean that we are necessarily opposed to a reform of the policy, to tackle some of the loopholes that exist with the previous policy and to perhaps create new opportunities for new farmers through tenancy opportunities and so on, where there may be some tax reliefs available to them? We are definitely more than happy to discuss those options, but, again, it is about that opportunity of opening the door to discuss the best way forward for this that works for the proper family farms across the UK but closes the loopholes as well. I do not like using the word “scrapping”, because I am sure negotiations and compromises will make up a lot of this discussion.

I would not go against the EFRA Committee, because its conclusions were not to scrap, likewise. It said quite clearly that reform needs to be undertaken. We have to understand that there are people, businesses and businesspeople who are utilising the reliefs available and not doing anything illegal, but it has an implication for the value of farmland as well. Farmers are caught up because the asset value inevitably increases quite rapidly. I stressed earlier that that asset, to a farmer, is a working asset, not an investment. It is something for the future generations, whoever they may be, if they wish to come into this industry, to have a business to carry on. The fundamental reason why the reliefs were given in the first place was to stop the break-up of family businesses—I stress “businesses”—so that they could continue to be multi-generational for the years to come. Going back to the fundamental message that food security is national security, there is a responsibility on us to review the announcements from the Budget and from the Treasury. I find it very difficult, when facing up to the Under-Secretary in the Treasury, to be told that these reforms are fair and balanced. I find that very difficult, to be perfectly honest with you, particularly given the personal conversations that I have had with numerous people who do not feel it to be fair and balanced.

Thank you all for coming today. We have moved on to what I wanted to ask about, very helpfully. You have touched on this already, but I would like a little more detail, if possible. Is the issue of wealthy individuals purchasing agricultural land to avoid inheritance tax creating a problem in Wales for farming?

Let us be conscious of the fact that some of these investors offer land for the tenanted sector. We dare not lose that ability to rent land that is affordable. Do not throw everything out while trying to deal with one issue. Some 30% of the land area in Wales is under some form of tenancy or agreement, so there is an intrinsic ability for the future generations, like Dominic, to come into this industry, having that tenancy sector and that availability to transition from one farm and go up the ladder, if you like. I hope that that is understood very clearly. I hinted at the clawback mechanism, which was the offer that we presented to Treasury. If there was cash generated by that transaction and that land was not used to continue the process of producing food, for example, then that money should be taxed. If you like, tax it at 40% rather than 20%. These mechanisms are operational in other countries, where they can play around with the levels of reliefs and the taxation levels. It gives Treasury that ability when money is made during any transaction, rather than where a farmer is transferring it from one generation to the other and not a single penny arrives in their pockets, but it is just to continue that farm business for generations to come.

I completely agree with what Aled is referring to. A number of large landowners offer huge opportunities for the tenant sector, and we must not forget that in this space, but I completely agree that it is more a matter of when the tax should apply. That continuation of agricultural land remaining under agricultural production is quite crucial. There is an inevitable result of this policy as things stand. I know that UK Government officials have alluded to how this should free up more land for new farmers and reduce land prices, but we have to consider the other land use demands that we currently have across the UK, whether those are for climate change offsetting, tree planting or house building. There is a long list of other demands on the waiting list for when this land becomes available. Effectively, land prices will just continue to increase, and it will not create those opportunities that have been mentioned. It is more of a matter of when it should apply, but retaining those assets for agricultural production and food production—we have mentioned how important that is—is fundamental. I agree with Aled that if funds are raised as a result of the sale of that asset, there is then a question of whether tax should apply at a full rate. We could discuss the rate for hours, but it is about working through those details.

Again, you have taken the words out of my mouth about when tax should be applied and what have you. The big one I want to carry on with is that tenancy opportunity. As Gareth was saying, in theory it should allude to more land being available if it is being sold, but as we have said, the opportunity to actually purchase this land is only going to get finer and finer. Land value will continue to increase; there is no doubt about that, with other opportunities for rewilding, carbon offsetting and all those other important matters. Having the opportunity to tenant with a large estate owner who just wants the farm to continue to be farmed is a massive opportunity for young farmers and people like me. On the outside, it might sound bad that there is one man that owns a big piece of ground, but if the opportunity to continue to produce British food is there, that should surely be more important, while, as we alluded to, taking that tax when it is right to do so. As it stands, the policy will undoubtedly put tenants at risk if that land has to be taken back in, sold and parted out. The risk to a tenant will go through the roof, and that in itself will cause a detrimental impact on agriculture in Wales.

There is the perverse situation where we could see a creation of a new type of investor, particularly when pensions will be taxed. There is the ability to invest in land, particularly in Wales and in smaller farms. There could be those new investors coming in and purchasing land, not to farm but as an investment, conscious that the reliefs will be available to them. They would not be farmed as such, unfortunately. We have to be conscious of the changes in the fabric of rural farming circumstances.

Thank you all: that was very helpful.

We are moving on to another aspect of farming now.

Aled touched on fairness in the supply chain briefly. We have not, in the FUW, had huge dealings with the Groceries Code Adjudicator, other than responding to the statutory consultations as time has gone on. Our position to those consultations has not changed a great deal throughout that process. We are very clear that the GCA’s remit should be expanded to include indirect supplies, so that it provides fairness throughout the entire supply chain. There is a clear omission there. There is also a question, within the remit of the GCA, about raising investigations into those within the supply chain. As far as I am aware, there has to be a clear mandate for that investigation to take place, whereas we would argue that it should be able to carry out an investigation if there is any cause of concern, I suppose, so that it can take a slightly more flexible approach to how it manages the supply chain. On top of that, as markets develop we are seeing a lot more retailers using online platforms now. You have to ask whether the GCA has the resources required to carry out its remit to its full capacity. We will be responding to the current consultation as well.

I was reminiscing before coming into the room: it was in 2012 that I gave evidence to the Welsh Affairs Committee for the first time. That was on the dairy industry: “SOS Dairy”, when dairy prices crashed. You are right, Steve, because there has been a long history of unfairness in the supply chain. UK Governments can be proud of the fact that the Fair Dealing Obligations (Milk) Regulations went through last July. That will have to be in place before 1 July 2025. That gives you a model. I give credit, because this has taken a long time and it has taken all parties across the House to get this piece of legislation over. There is a model there that can work for the other sectors as well. If we embed value and our values—I stress “our values”—in terms of fairness in the supply chain and how we should operate in an honourable way, there is a responsibility on this Government to make sure that we press ahead with reforms in other sectors as well.

The two previous speakers have covered the points pretty well. The fairness within the whole supply chain is a key aspect that we really need to look at and understand why we have allowed it to get to the point that it is at now. You would not have anything without the start of the process being the farmer, so the understanding that those farmers need the support that they should get and that fairness throughout is a critical point that we need to really work on.

This is very important to get over. Covid showed us quite clearly that only 50% of the food goes through the retailers. Food service and out-of-home is a huge contributor to the daily habits of consumers. Enlarging the scope to distribution processing is also crucial for us. Likewise, reducing the threshold of GSCOP below a £1 billion turnover will bring more businesses within its scope. You would cover the broad breadth of the supply chain and deliver the fairness that we are striving for, I think.

I will just touch on something that has not been mentioned. I fully agree with what Aled is saying. This is a bit of a side note to the role of the GCA at the moment, but there seems to be a clear omission in not only the retail sector, but the food service sector. That is where there seems to be a huge missing opportunity to support British agriculture, when a lot of the labelling is missed. This is a personal experience, but hopefully members of the Committee are aware of the pub that Mr Jeremy Clarkson has opened in Oxfordshire. It has received a huge amount of attention because the pub is supplying British produce and local fruit, veg, meat and so on. You have to raise the question of why one pub in Oxfordshire that is making a big fuss of sourcing local produce is mainstream news. Why are a number of other pubs and restaurants not doing the same thing? If you were to go back three or four decades, pubs would be doing that without batting an eyelid. That would be the standard procedure. Now, in such a short space of time, we have actually turned it on its head, whereby one pub in the UK is—for other reasons, granted—receiving a huge amount of reputation for supplying British produce when it should be the industry norm, within reason.

No, not particularly; the other witnesses have covered the points. Yes, certainly we need to be championing the use of British produce, as Gareth said, which would have been the norm not all that long ago. It has gone full circle and become—I do not like to use the word “trend”, because it should be how it is. It certainly seems to be the in thing at the moment to support British, which is quite a wrong thing to say if you think about it. It should be how it is. Yes, it is certainly as Gareth and Aled said—they have covered it all.

Going back to trade, and in particular UK and EU trade, we have had the UK-EU reset deal very recently, which my colleague will touch on in a moment. Putting that aside for now, how has Welsh agricultural trade evolved since the UK left the EU?

I was in Brussels just over a month ago in preparation for the EU-UK summit. The understanding of the implications since Brexit was crucial in those discussions, including understanding the trade flows and evaluating the barriers to trade. I mentioned earlier how important trade is, particularly with the EU. The EU, in terms of value, is seven times more than our second trading partner, which would be the US. We should bear in mind the scale of that very close market. The volume of product moving since the Brexit decision has reduced quite alarmingly. Meat is down 33%. Poultry, eggs and milk is down 20%. The value has remained fairly constant, but we have to be concerned about the volume reduction. I welcomed what was within the remit of the agreement and the areas that they will be discussing, particularly the friction at the borders, which inevitably we will have to discuss. There are common standards between the UK and the EU. We have to bear in mind what dynamic alignment would look like and proceed with caution. We have been guarded on these particular issues, because there might be areas where we want to go ahead of the EU. We have to tread very carefully. For us in Wales, particularly in the livestock sector, removing some of those barriers will be crucial. Likewise, when you consider trading negotiations not with the EU but with other countries, I applaud the respect that has been given to the standards and methods of production here in the UK, which was very welcome, to be perfectly honest. We felt that when the Australian and New Zealand trade agreements were agreed, there was not sufficient protection for sensitive industries, particularly here in Wales. There was no impact assessment—I stress that: no impact assessment—on the implications of the New Zealand and Australian trade agreements. I hope that as we proceed, they will be very clear and take into consideration those sensitive issues for us here in Wales.

Do you have anything to add, Gareth?

I will give way. I will mop up the bits, but I am going to give Dominic the chance.

Thank you—they steal all my points if I go last! As Aled alluded to, an impact report is going to be crucial, certainly in Wales, to understand how trading freely would work out for us and the implications of the deal going forward. That is quite an important point for the Committee to understand. We need to understand all the implications, positive and negative, from this deal and going forward, as Aled alluded to, with the border issues that we are having. Trying to clarify that red tape and the understanding around that will be vital. Allowing product to move more freely will hopefully improve the volume of product going back and forth to the EU. Obviously the decline in product is alarming; understanding the red tape and its repercussions will hopefully eradicate that, or certainly cure some of it.

Just to be clear, do you put that decrease in volume directly down to the additional barriers that were put up since leaving the EU?

Yes, trade barriers and the opportunities of other markets as well. We have to bear those in mind.

It is likely to be partly down to the reducing livestock numbers in the UK as well. Trying to maintain domestic demand as well as our export markets is something that is constantly changing. To reiterate, notwithstanding the fact that the trade and co-operation agreement avoided a situation whereby we had tariffs and quotas on EU trade, it resulted in a huge number of border checks and non-tariff barriers for our produce going into the European Union, and yet the European produce that was coming into the UK faced nothing of the sort. Since 2021, I think, we have seen that constant trade-off, whereby we have faced far more bureaucratic checks and our counterparts have not. To give a figure on that, reports suggest that the industry has spent in excess of £200 million on export health certificates since 2021. That gives an idea of the increased costs that have been associated with those exports.

That has been a hit to the industry since that time.

This session is on challenges and opportunities. There are certainly opportunities. The methods of production that we have in Wales will give us those opportunities, because we can have full traceability audits. In terms of carbon measurements and obligations, we have a very good story to tell. I hope, long term, having the ability to access markets of higher‑value products, fully traceable and auditable in the methods of production, would give us those opportunities.

This is not on my register of interests, but I should declare that I am a farmer’s daughter. My mother, who now owns the farm, is also a widow. I will put that out there before we start. My question is about the announcement of the Barnettisation of the support coming to Wales. I want you to convey how you think that Barnettisation will impact agriculture in Wales.

We touched on this before you came into the room, unfortunately. Historically, the allocation of funding was based, within the EU, on the levels of productivity within the four nations. Hence, 8.9% of the budget would have come to Wales. It is far higher than our population. If it were Barnettised, it would mean that our allocation would fall to 5%. That would be critical for us. I think that the announcement that the Chancellor made was that any uplift in future funding would be Barnettised. It has implications for us. Looking at the envelope available to Wales and linking to the critical nature of food security, I hope that the need to maintain that budget allocation is understood, conscious that the ringfencing ability is not there. I hope that this House, and the Senedd back home in Wales, will appreciate the crucial nature of food and farming for the long-term security of this country, and that the allocation would be fair and balanced as well.

The key message on Barnettisation is that, if and when there are increases in the agricultural budget here in England, we will receive less in Wales than we would have under European rules. Effectively, the risk—granted that the potential impact is long term—is that we will start to see divergence in funding across the devolved nations. I touched on that point earlier. We have long lobbied against Barnettisation because of that real issue. Not only does this move us further away, yet again, from European principles that the member states continue to operate under, but it carries the risk of an internal UK divergence that will not necessarily be caught by the United Kingdom Internal Market Act. It is almost at a UK ministerial level when it comes to budget setting. There are obviously elements within the internal market Act that manage certain things, but it is a predecessor to when we get to those conversations around policy and things. There is that risk and, as I mentioned earlier, the lack of those UK frameworks to keep all the nations within that framework, respecting devolution, granted. We have that lack of mechanism to keep everybody working in the same direction then, shall we say.

Much as Gareth said, that risk of that slow separation is something to be concerned about. I am aware that we are devolved, but that ability to work together is quite key. The movement away from receiving fair and even funding is quite a critical thing that we need to be conscious of on a long-term basis.

Aled touched on the ringfencing. It would be a Welsh Government decision, but would you be in support of ringfencing that funding in Wales for agriculture?

Its devolved nature means that the decision should be for Welsh Government. I hope our representations back in the Senedd will lead them to the appreciation of the importance of fair and honourable funding for agriculture going forward. I hope that the Westminster Government will appreciate the important nature of funding and that, likewise, there is a reciprocal appreciation in the Senedd.

We have been quite careful with our wording and calls for funding in this space, because we need to respect devolution, of course. EU legacy funding is what we have been calling for all along to ensure that we remain competitive against our European counterparts. The key message here is the application of the Barnett formula. Granted, it was not necessarily ringfenced over recent years, but it was at least earmarked for agriculture. Now, that simply is no longer there. It just shows the lack of engagement between the Welsh and UK Governments. The need for that funding for agriculture is not necessarily getting through to the UK Treasury.

This is a slight change of subject, but I want to look at skilled and seasonal labour in farming in Wales. Do farmers in Wales currently have sufficient access to both skilled and seasonal labour? Does the UK’s immigration and visa system support those needs?

As we have covered, we are very stock‑based, and that seasonal work may fall into the arable side of things. It may not have such an impact as it would across England, but certainly it will have an impact on us. The access that we have can be improved. That opportunity and the ease of having seasonal workers is vital to allow us to continue to be sustainable through the small part of arable farming that we have in Wales, and fruit picking of course. There is room for improvement there, certainly, but I will let the other two witnesses continue on that point.

Our primary membership base for the FUW is family farms—beef and sheep primarily, but also some dairy. The reliance of our members, and, more widely, the agricultural sector in Wales, on seasonal labour is perhaps less than you would expect in parts of England. It is important to note that differential. To give some indication, based on the number of BPS recipients in Wales and the number of staff employed on farms, you are talking about two full-time members of staff per BPS claimant. That should be referenced as an indicator of affordability, as opposed to on-farm labour requirements, because those two employed on each farm on average would be working far more than the average 45-hour week, for instance. It is a difficult one to envisage, but I want to highlight that it is less of an issue perhaps in Wales than it would be in other parts of the UK.

We cannot isolate this debate from the whole supply chain. Granted, as previous speakers have said, demand for labour on farms is probably different from what it might be in England or in other countries. There again, we understand that our processors who would take our product rely on labour. If they do not have the ability to expand and process the materials that we produce, we will be impacted long term. That is a crucial message. I will give you the example of a family in Pembrokeshire who required staff to come in. It is quite a large unit and historically they have been able to access foreign labour, who have worked very hard. They had a particular circumstance when two—a couple, by the way—who arrived at Bristol airport were made to feel so unwelcome that they decided to return home. I hope that there is a message somewhere.

That happens a lot when you go to Bristol airport.

I hope the message goes. These people who come here to work are so valued, and farmers and processors understand the critical nature of having access to labour. It is not an easy industry and there are many skills that are employed. It is not to be taken lightly at all. These are skilled people, undoubtedly. They might be manual workers, often, but there is still a skilled industry to come into. I hope that the message will be firmly understood.

That is quite a large question to finish on, so I will try to be quick.

We like to leave the best until last.

It has been a really valuable debate. We have touched on the impact that we are seeing in Wales in terms of livestock numbers. Prices are high, but are actually lower than last year. We saw surges in red meat imports from New Zealand and Australia last year, so clearly that is having an impact this year. The big thing for us—and this is an important point to apply to any trade negotiation, so hopefully this covers some of the points that we may not have reached today, with the USA and others—is that, when Government officials and others refer to UK standards, they are quite often referring to maintenance of UK food safety standards or SPS checks at our borders. There seems to be very little mention of the differences in food production standards between the United Kingdom and other nations such as those in the southern hemisphere. That is a really important differential. Yes, there are standard safeguards within these agreements. There is a question whether the UK Government would ever actually use those safeguards because of the trading implications and the relations that that could hinder. If the UK Government are signing trade agreements with any nation across the globe where food can be produced at a cheaper cost than here, due to regulatory requirements or what have you, that is what quotas and tariffs are for: to make that trade balance. Yet when they are liberal trade agreements, such as the ones that you refer to, is it undermining UK producers? Yes, 100%. There really needs to be awareness raising here across the UK Government, because food safety standards do not necessarily mean that UK producers have been protected.

We have seen none of the impacts thus far. I would warn about the implications of what President Trump undertook back in April and the global disruption that it has caused. Because the trade agreements with New Zealand and Australia have already been signed, dusted and everything else, as every year passes the quota, non-tariff, available to Australia and New Zealand increases, until such time that they will have full unfettered access into this market. The safeguard within the trade agreements is reactive. It does not assess the impact until it has actually happened. Responding when the damage has already been done will be too late. If there is a lesson to be learned in future trade negotiations and to be understood clearly in the long term, it is that those safeguards have to be proactive. Particularly for us in Wales, as a red meat and dairy area, we have to be extremely cautious. A safety net placed a few inches above a concrete floor is not a safety net. I have been in the dairy industry for so long that I have had to live with 12p a litre. I tell you, it is particularly difficult. I hope that the fairness of supply chain, as we discussed earlier, but also trading agreements, will reflect the critical and sensitive nature of these businesses.

As Aled alluded to, the importance for future deals is massive. Certainly from our point of view as young farmers and as the next generation, the opportunity to know that we have a safety net to ensure that those deals cannot cripple us from the knees down, and to ensure that British produce is put first, is massively important. It is about ensuring that there is safety not just today and in five years’ time, but 15 or 20 years down the line. Once these family farms disappear, they will not come back, so it is critical that we ensure today that the future of those farms is taken care of through planning and making sure that those deals will not turn around to bite us later on down the line.

I thank all the panel members for appearing before us today and for their expansive and knowledgeable answers. It has been really helpful in informing the Committee. This is part one of a number of sessions, so we will be going further on this inquiry. Thank you so much for your time.