Why aren’t farmers paid more for what they produce? – Inside track

This post is by Tim Lang, professor emeritus of food policy at the Centre for Food Policy, City St George’s, University of London

Why on earth do we maintain an economy where farmers and growers receive roughly seven per cent of gross value added (GVA) of the food system? The big money is made off the land, not on it or in the sea. The politics have veered from a situation where landowners were paid just for owning land – the basic payment scheme – to one where they are paid to look after ecosystems, without incentivising food production. Welcome to the new world of the Environmental Land Management scheme (ELM) and now-you-see-it-now-you-don’t Sustainable Farming Incentive?

In both the old and new worlds, food production has been treated with some contempt. In the ‘new’ Gove-Goldsmith-Eustice era that Labour has inherited but not yet changed, farmers are incentivised to manage land differently. Sure, feeding people is the tacit justification but the  rationale gets lost when so much output is simply mass commodities that food industries turn into ultra-processed foods. The purpose of farming matters critically now when politics are in a cleft stick and geopolitical clouds darken.

Farmers are making tiny profits The amount of money that goes to farmers varies. I’m told that sometimes half of the price consumers pay for an egg is production costs. For apples or carrots, it’s about a third. Costs of production vary – some monitored by AHDB – but Professor Lisa Jack’s 2022 report showed how farming often makes only one per cent profit from primary production.  Producing real food gets lost in the economic treadmill.

It’s little wonder the UK politics of inheritance tax (IHT) being applied to land erupted as they did. Land ownership has been one constant for owner-farmers. However good or bad prices are, at least the land can be handed on. The Department for Environment, Food and Rural Affairs’ (Defra’s) Total Income from Farming (TIFF) figures pretty consistently show how little income (English) farmers make. In 2023, it was £4.5 billion.  Farming’s value added in 2023 was £10 billion out of the £147.6 billion added along the food system as a whole. Farming is about large capital assets for low returns. That’s been the unwritten contract of long term intensification for the lifestyle.

For decades, the serious money has been made off, not on, the land. Tesco may report a retail adjusted operating profit of £2.9 billion for 2024-25 but it and its fellow Big 9 retailers are locked in a serious battle with manufacturing and hospitality as to which sector’s value adding triumphs. Each currently takes about a third. Retailers are the gatekeepers but their returns on capital (ROCE) are quite low. Catering’s outlay is relatively small but businesses often don’t last long. Manufacturing used to have things mostly its own way in the early 20^th century, but it is now locked into the ultra-processed food dead-end.

Inheritance tax raised the stakes In this battle of the titans, not much attention goes to farm incomes. Farm profitability can vary, to be sure, but the chancellor’s IHT imposition has certainly raised the political stakes.

When elected, Labour was fully aware of these harsh system dynamics. Defra’s status in Whitehall has taken a beating with the IHT change. Did Defra see it coming? If not, why not? Just when Labour needed to have farmers onside for really brutal times ahead, trust and liaison was shattered. I happened to be with present and past presidents of the NFU the night Defra closed the Sustainable Farming Initiative. Shock mixed with anger was palpable.

Here there must be sympathy for Defra. It hasn’t got blank cheques to write. But, again, the semiotics mattered. The promise of ‘taking back control’ post Brexit was symbolised by the shift (in England) to subsidising farmers only if they improve and protect ecosystems, not just for owning land. Closing SFI at short notice seemed to betray that promise.

Will the UK kowtow to the US? Now we are in Trump world. Food and farming are in US tariffication play. Will the UK accept US chlorinated chicken and, worse, pesticide residues? Will the UK kowtow to the USA or side with EU food standards?

Amidst these swirling problems, I find myself going back to basics. What’s the point of land? What is farming for? What’s food for? The Gove-Goldsmith-Eustice line, symbolised by the 2020 (English) Agriculture Act was clear. The task of land management is to protect and enhance ecosystems. Food was barely mentioned. Thus, the debate around planning is dominated by a schism: land for housing vs land for ecosystems, as though nature has to be sacrificed to allow the big housebuilders to start pouring concrete. And food is left to Tesco et al. This is short-sighted policy, let alone politics.

What if food was taken more seriously? What if growers got a good rate of return? Could this cut through the policy mess? I think it could but only if we get back to basics and enshrine – and I mean in law – food production as a core function for farming. Make the ‘we feed people’ rationale the reality while rejecting the nature-depleting model of agrichemical intensification. Build ecosystems support into food production, rather than separating them.

It’s a question of national security This is the government’s opportunity. As my recent Just in Case report to the National Preparedness Commission suggests, raising food production, not just anyhow, but sustainably, is again a matter of national security.

This is the challenge: how to pay primary production to put food growing back into the field. Crop rotations. Horticulture. A more decentralised food system. Feeding people when the geopolitics are shaky. We need policies to deliver something new.

Policy makers have, for too long, accepted the unacceptable. Current land use is actually about feeding animals, slow converters, more than humans. Commodity production gives raw ingredients that manufacturers turn into mass food products, the ultra-processed foods, now recognised as drivers of population ill-health.  For two decades, policy makers have been warned this damages lives and the NHS. Professor Tim Jackson recently estimated the real UK costs of poor food and diet are £268 billion every year.

What if farmers actually made more money from growing real food for health? Crops that went directly to consumers. This is the heart of the political crisis. Farming isn’t incentivised to plant and market actual food.

It’s astonishing that farming puts up with making next to nothing from growing food. What if the law stipulated that ten per cent or 15 per cent of the price consumers pay for food went to the primary producer, not today’s average of seven per cent? What if the NFU and Defra joined forces to urge consumers that getting more money to growers would make their supply more secure, is less open to the vagaries of international politics and markets, and is key to spending less on healthcare? UK consumers spent £245 billion on food and drink last year. Doubling farm incomes would have a tiny effect.

Paying farmers more would be canny politics True, this raises the complexity of methods of production and long supply chains, but that’s where the environmental damage can best be tackled. Isn’t that what we’ve been arguing for decades… the need to tackle externalised environmental and health costs? And for food prices to reflect those true costs?

To pay farmers more would be canny politics all round. It would rebuild burned bridges and make it clear that deals with even ‘cheaper’ US food are fantasy politics, just when we need security. We need to start building shorter, more diverse food chains, more regionalisation and better food cultures. At a time when environmentalism is being attacked for putting net zero or climate above people, by putting feeding people at the centre of agri-food politics, environmentalism could again champion joined up politics.

The Gove-Goldsmith-Eustice correction forgot about people, let alone food. If Labour really wants to save the NHS and the environment, paying growers to grow food sustainably is the way to go. Pay them more. Stop dangling subsidies to disguise absurdly low incomes and high capital assets. Encourage more people into primary production. What’s the alternative?

Tim Lang is the author of Just in case, a report to the National Preparedness Commission, published in February 2025.