Rural economy: UK government policy

Approximate read time: 25 minutes

The House of Lords is scheduled to debate the following motion on 11 June 2026:

Lord Fuller (Conservative) to move that this House takes note of the government’s record on the rural economy.

As part of the devolution settlement, responsibility for many of the policy areas directly affecting rural areas of the UK has been devolved.^[1] This includes responsibility for policies including agriculture, forestry, fisheries and tourism. This briefing focuses on UK government policy concerning the rural economy in England.

1. Rural economy in England: Overview

1.1 How much do rural areas contribute to the UK economy?

In 2023, rural areas of England contributed an estimated £259bn in gross value added (GVA) to England’s economy.^[2] This represented 12.2% of England’s total GVA, broadly similar to the average over the last 20 years (12.1%). The figure represents the economic activity in rural areas rather than the economic output from the rural population. This is because many people living in rural areas commute to work in urban areas. The following chart shows the change in the proportion of England’s total GVA generated in rural areas since 2001:

Figure 1. Proportion of England’s gross value added generated by rural areas, 2001–23

1.2 What types of sector operate in rural areas?

The rural economy is diverse and includes many different types of industry. In many respects, the economy of rural areas in England is similar to that of predominantly urban areas. For example, in 2022 public administration, education and health was the largest sector in both rural areas in England (22%) and urban areas in England excluding London (21%).^[3]

However, several sectors are more dominant in rural areas. For example, real estate activities constitute 15% of GVA in predominantly rural areas compared to 12% in predominantly urban areas (excluding London). Manufacturing constitutes 13% of GVA in predominantly rural areas compared to 10% in predominantly urban areas. A full breakdown of the size of various economic sectors in rural areas is provided in the House of Lords Library briefing ‘The rural economy’ (13 December 2024).

In addition, the Department for Environment, Food and Rural Affairs (Defra) has noted that tourism also makes an important contribution to the rural economy. In 2018—the most recent year for which official figures are available—tourism made up 4% of GVA in rural areas of England.^[4]

While agriculture makes up approximately a third of GVA in rural areas in England, this is a relatively small proportion of the GVA of England overall (0.7%).^[5] However, it remains the largest industry in terms of land use. In 2025, agricultural land in England made up 8.8mn hectares, 68% of the total area of the country.^[6] The proportion of England taken up by agricultural land has stayed relatively consistent over the past decade.

1.3 How many people are employed and what type of businesses operate in rural areas of England?

In 2023/24, businesses registered in rural areas in England employed 3.5 million people.^[7] This accounted for 12% of all those employed by registered businesses in England. There are more registered businesses per head in rural areas in England than in urban areas. In 2023/24, there were 550 businesses per 10,000 population in rural areas compared with 390 per 10,000 population in urban areas.^[8] The financial turnover of businesses in rural areas also tends to be lower than for urban areas. The average turnover of businesses in rural areas per person employed is £158,000 per person employed compared to £242,000 in urban areas.^[9] In rural areas, the largest sector in terms of registered businesses was agriculture, forestry and fishing (14%).

1.4 Productivity rate in rural areas

Productivity in predominantly rural areas tends to be lower than in predominantly urban areas. In 2023, the productivity rate (as measured by the rate of output per workforce job) of predominantly rural areas in England was around 92% of that for the country as a whole excluding London.^[10] Over the last 20 years this figure has fallen by four percentage points from 96% in 2001.

2. Government strategy and policy on rural areas

The government has published several policy papers outlining its strategy for supporting rural businesses and communities, including support for the farming sector. It has also committed to publish further reports outlining its plans for growing the rural economy, including its 25-year farming roadmap discussed below.

2.1 Rural proofing and rural taskforce

Recent years have seen several calls for more support for the rural economy. In 2019, the House of Lords Rural Economy Committee published a report recommending the then government should do more to ensure policies reflect the needs of rural communities.^[11] The committee argued that successive governments had undervalued the contribution of rural areas to the UK economy and the country’s wellbeing more generally. It also argued governments had applied policies which were largely devised with urban and suburban areas in mind which were often inappropriate for rural England.^[12] The committee recommended the government should ensure improved “rural proofing” is applied to all policies to ensure the impact of these policies on rural areas was taken into account.

Following the 2024 general election, the Labour government confirmed it would commit to the principle that all policy decision-making should be rural proofed.^[13] In April 2026, the government announced it would establish a cross-departmental rural taskforce.^[14] Ministers described the purpose of this taskforce as being to enable the government to understand better how to support rural businesses and communities, including by tackling disadvantage in rural areas and supporting growth in the rural economy. The government also said one of the functions of the taskforce would be to take the lead within government on ensuring its policies are rural proofed effectively.^[15] The taskforce will also feed into a future report on the rural economy which the government has committed to publish later in 2026.^[16]

In May 2025, the government also published its strategy on rural proofing which restated its commitment to consider the impact of its policies on rural communities.^[17] Reacting to this strategy, The Rural Services Network, a special interest group of the Local Government Association, has welcomed the government’s commitment to rural proofing.^[18] However, it argued that, while there are good examples of rural proofing at the national level, this remains the exception rather than the rule. It has argued the government should do more to ensure rural proofing becomes “a standard part of government thinking rather than being a discretionary extra”.^[19]

In December 2025, the chair of the House of Commons Environment, Food and Rural Affairs Committee, Alistair Carmichael, wrote letters to government departments, including Defra, to confirm what work they were doing to ensure all government policies were adequately rural proofed.^[20] In her response, Secretary of State for Environment, Food and Rural Affairs Emma Reynolds told Mr Carmichael that, while rural proofing was the responsibility of all departments, Defra provided support such as data, guidance and training to help rural proofing across government.^[21] She also provided examples of recent government policies which had been rural proofed, including support for local bus services, improving digital connectivity and tackling rural crime.

2.2 25-year farming roadmap

In November 2024, the then secretary of state for environment, food and rural affairs, Steve Reed, announced the government would be developing a 25-year farming roadmap.^[22] He described the purpose of this roadmap as helping the farming industry transition to “new models that are more environmentally, and also more financially, sustainable for the long-term”. He also said the development of the 25-year road map would be “farmer-led”.^[23]

In an update published in January 2025, the Labour government said the roadmap would be:

[…] the most forward-looking plan for farming in our country’s history and involve government and farmers working together to identify solutions to challenges and ensure government support is in place to enable farmers to take the actions that will let their businesses succeed.^[24]

In the same announcement, ministers outlined a series of reforms intended to support the sector. This included using planning reforms to make it quicker for farmers to build the infrastructure they need on their farms to boost food production. Further information on these policies is provided in the House of Lords Library briefing ‘Economic and planning policies: Impact on farming and rural communities’ (28 March 2025).

In May 2025, the House of Commons Environment, Food and Rural Affairs Committee published a report on the government’s farming policies.^[25] The committee welcomed the government’s commitment to publish plans for supporting the profitability of the sector.^[26] However, it argued the 25-year farming roadmap should be published urgently. It noted that some policies, such as the changes in government support for farms, were already being made without ministers having set out adequately their vision for the sector. The committee argued that this was leading to confusion and damaging confidence in the farming industry.^[27]

The government’s roadmap has yet to be published. Responding to a House of Lords oral question in April 2026, parliamentary under secretary of state at the Department for Environment, Food and Rural Affairs, Baroness Hayman of Ullock, said the government expected to publish it “later this year”.^[28]

2.3 Farming profitability review

In April 2025, the government launched an independent farming profitability review to be led by Baroness Batters (Crossbench).^[29] Baroness Batters is the former president of the National Farmers’ Union (NFU) of England and Wales and a farmer. The objectives of this review were to consider what actions farms could take to increase profitability and how supply chains might be improved.^[30] The government said the findings of this review would feed into the 25-year farming roadmap.^[31]

The findings of this review were published in December 2025.^[32] In her foreword to the report, Baroness Batters emphasised the diversity within the farming industry and noted different types of farms faced diverse problems. However, she said one of the issues that affected all farmers was a sharp rise in fixed costs such as energy and wages. She also noted the growing impact of compliance with environmental legislation and regulation. The report made several recommendations, including for the establishment of a partnership between government, industry and farmers in England to support greater investment in farming.

The government has yet to respond to the report but has confirmed its full response will be included in the 25-year farming roadmap when it is published.^[33] However, in January 2026, Ms Reynolds also said that the government would be establishing a farming and food partnership board following the recommendation of the farming profitability review.^[34] She said the purpose of this board would be to ensure that there was closer working between the government, farmers and food businesses in the development of policies affecting farming in England.

Shadow Secretary of State for Environment, Food and Rural Affairs Victoria Atkins contended that the findings of Baroness Batters’s review supported the view that many farmers were considering whether it was viable to remain in the industry.^[35] She argued the government should do more to reduce the regulatory burden faced by farmers, describing the current system as working “against the grain of rural life, not alongside it”.

2.4 Land use framework

During the previous parliament, several House of Lords committees recommended that there should be a national framework setting out how rural land should be used.^[36] This framework would set out how to balance competing demands for land from development, agriculture, energy, recreation, conservation and other uses.

The Labour Party committed to publish a land use framework in its 2024 manifesto.^[37] In December 2025, the government published its environmental improvement plan.^[38] The plan contained commitments for improving the environment, including support for landscape recovery projects and biodiversity. As part of this plan, the government confirmed its forthcoming land use framework (LUF) would:

[…] provide updated land-use analysis, for national and local government, landowners, businesses, farmers and nature groups to make informed decisions to meet the demands on our land. The LUF will set out the changes needed to support multifunctional land use and sophisticated spatial planning and will feed into plans and strategies such as local nature recovery strategies and spatial development strategies.^[39]

The LUF for England was published in March 2026.^[40] The government said the framework would enable planning decisions to be made in a way which balanced competing demands such as for new homes, nature restoration, clean energy and food security.^[41] The framework included analysis of how land use might need to change by 2050 to meet these competing targets. For example, it concluded that 2% of currently farmed land, classified as ‘utilised agricultural area’, may need to be used for solar and wind energy by that date.^[42] The report noted some of this land would continue to also be used for food production. The same report also suggested 2% of utilised agricultural area in England may need to be used for urban development, including housing by the middle of the century.

The Conservative Party has criticised the proposals in the land use framework. The shadow minister for environment, food and rural affairs, Robbie Moore, has argued the various changes outlined in the plan threatened to take up to 18% of current farmland out of food production.^[43]

The NFU welcomed the publication of the land use framework and noted the government had committed to maintain food production as one of its priorities.^[44] It also said the references to multifunctional land use as part of the framework were a positive development. However, the NFU argued more details were needed on how the targets in the framework would be delivered in partnership with farmers. The Campaign to Protect Rural England (CPRE) welcomed the ambitions of the government to balance competing needs for land.^[45] However, it argued there needed to be stronger safeguards for protecting the countryside, urging that:

Economic growth should not be prioritised at any cost to the countryside. How trade-offs are managed locally and nationally—and the degree to which the framework is integrated with other spatial strategies—will be key to its success.^[46]

The House of Commons Environment, Food and Rural Affairs Committee has noted that the areas where highest land use change is expected are in the North West, South West and South East of England, including upland areas.^[47] The committee has recently launched an inquiry into upland farms and landscapes and has said it will consider the impact of the land use framework on these areas.^[48]

2.5 Sustainable farming incentive scheme: 2026

The environmental land management scheme (ELMS) was introduced by the previous Conservative government as the main new vehicle for providing financial support to farmers in England following the UK’s withdrawal from the EU common agricultural policy.^[49] One of the components of this scheme was the sustainable farming incentive, which is intended to provide farmers with support to adopt and maintain sustainable farming practices which enhance the natural environment.

The Labour government committed in 2024 to retaining ELMS as the key form of support to farmers and other landowners in England.^[50] On 11 March 2025, the government announced it had stopped accepting new applications to the sustainable farming incentive (SFI) scheme because the fund’s maximum limit had been reached.^[51] Farming groups were critical of the government’s handling of the closure of the scheme to new applications. For example, the NFU and the Nature Friendly Farming Network suggested it left farmers feeling that they would no longer be rewarded for environmental work, including in some cases work they had already begun.^[52] The House of Commons Environment, Food and Rural Affairs Committee also criticised the decision, arguing the government should have outlined how it intended to fill the gap in funding for those farms that had missed out.^[53] Further information on the closure of the SFI scheme to new applicants and the reaction is provided in the House of Lords Library briefing ‘Economic and planning policies: Impact on farming and rural communities’ (28 March 2025).

The government confirmed in 2025 the next iteration of the SFI scheme would be open to new applicants in 2026.^[54] The government has said the new SFI offer will be “more focused, more transparent and fairer so that as many farmers as possible can benefit from it”.^[55] In January 2026, Secretary of State for Environment, Food and Rural Affairs Emma Reynolds confirmed the new scheme would be available to applicants with a minimum area of three hectares.^[56] This followed the recommendation in the final report of the farming profitability review.^[57] The review had recommended the scheme should be restricted in this way to ensure it was better targeted towards “active” farmers rather than landowners or developers.

In the same statement, Ms Reynolds also confirmed there would be two application windows for the new SFI scheme.^[58] The first application window would open in June 2026 and would be open to small farmers of up to 50 hectares and to all farms without existing ELM revenue agreements.^[59] She said these restrictions were intended to ensure that as many farmers as possible were able to benefit from the scheme, noting that under the previous SFI scheme a quarter of the support went to 4% of farms.^[60] She also confirmed a second window would be open from September 2026. Guidance for applicants on the new SFI scheme was published by the government on 6 May 2026.^[61]

2.6 Changes to agricultural property relief

In the 2024 autumn budget, the government announced it would be making changes to agricultural property relief (APR) and business property relief (BPR) from inheritance tax.^[62] APR reduces the inheritance tax farmers and landowners must pay when passing farmland to the next generation, whilst BPR applies to business assets that are part of the estate.^[63] Both reliefs currently offer a 100% or 50% tax reduction, depending on eligibility, with no cap on the total relief amount.

The government announced that, from April 2026, the full 100% relief from inheritance tax would be restricted to the first £1mn of combined agricultural and business property.^[64] Above this amount, the government said landowners would access 50% relief and would pay inheritance tax at a reduced effective rate up to 20% (rather than the standard 40%).

Following this announcement, the government received criticism from the farming industry, which argued the policy was a threat to the future of family farming. For example, the Countryside Alliance argued that while the government had a “legitimate aim” in seeking to limit the purchase of agricultural land as part of plans to avoid inheritance tax, the policy would impact family farms negatively.^[65] Further information on the reaction to this policy is provided in the House of Lords Library briefing ‘Economic and planning policies: Impact on farming and rural communities’ (28 March 2025).

In December 2025, the government announced the allowance would increase from £1mn to £2.5mn per estate.^[66] It said this change would offer more protection for farms and businesses while maintaining the “core principle” of the original policy that the most valuable agricultural and business assets should not receive unlimited relief.^[67] This was welcomed by the NFU, which said this change would mitigate the worst of the impact of the changes to inheritance tax for farmers.^[68] Further information on the recent changes to this policy is provided in the House of Commons Library briefing ‘Changes to agricultural and business property reliefs for inheritance tax’ (8 April 2026).

2.7 Food strategy

In July 2025, the government published its food strategy for England.^[69] This included several high-level goals, including supporting economic growth in the food sector and improving the resilience of domestic food production. The strategy did not include details of how these and other goals would be achieved. The government said that further details would be set out in future publications, including both the 25-year farming roadmap and the land use framework. Further information on the food strategy is provided in the House of Commons Library briefing ‘Impact of land use change on food security’ (14 November 2025). Responding to the strategy, the CPRE welcomed the government’s recognition of how food security, health, economic growth, and environmental sustainability are interrelated.^[70] However, it noted more clarity was needed on the objectives in the strategy, including on which farming methods are to be recognised as environmentally sustainable.

2.8 Farming innovation programme

In February 2025, the government announced several policies intended to support the profitability of the farming industry. These included investing £110mn in technology through the farming innovation programme and the farming equipment and technology fund to help fund research, development and purchase of agri-technologies.^[71]

The farming innovation programme is a joint Defra programme with Innovate UK, part of the funding agency UK Research and Innovation. Grants are available through a series of competitions intended to reward the development of new, innovative methods and technologies.^[72] In January 2026, the government announced the fund would support projects including breeding tomatoes enriched with provitamin D3 and the use of low-emissions fertilisers for dairy farming.^[73] The farming equipment and technology fund is supported by both Defra and private investment and is also intended to support investment in equipment and technology.^[74] Speaking in April 2026, Minister for Food Security and Rural Affairs Dame Angela Eagle told the House of Commons the total funding available that year through the farming innovation programme would be £70mn.^[75] Dame Angela also said £50mn would be available through the farming equipment and technology fund.

2.9 Trail hunting

The government has committed to introduce a ban on trail hunting, the practice of replicating hunting with hounds by following a sent carried by someone on foot or horseback instead of a live animal.^[76] The government has argued it has been used as a cover for hunting, which is banned under the Hunting Act 2004.^[77] In March 2026 it launched a consultation on proposals for how a ban might be implemented.^[78] This is scheduled to remain open until 18 June 2026. Further information on these proposals and the reaction to them is provided in the House of Lords Library briefing ‘King’s Speech 2026: Energy, environment and animal welfare’ (7 May 2026).

3. Read more

• House of Lords Library, ‘Clean power 2030 action plan: Impact on rural communities’, 17 April 2026
• House of Lords Library, ‘Climate change: Supporting farmers and growers’, 20 January 2025
• House of Lords Library, ‘“A plan to fix our broken food system”: House of Lords Food, Diet and Obesity Committee report’, 19 March 2025
• House of Lords Library, ‘Budget 2024: Inheritance tax, family farms and food security’, 5 December 2024
• House of Commons Library, ‘Support for rural businesses’, 16 June 2025
• House of Commons Library, ‘Debate on the future of farming’, 12 March 2026

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Image by Stuart Frisby on Unsplash.