It has been threatened for a long time from right wing Conservatives and brexiteers who could not wait to put an end to the EU single farm payment, but it’s the Labour Party which seems to be delivering the bitter medicine through necessity.
Whilst the agricultural budget is still there to fund environmental policy, under the pretence of a public good, what happens when Labour finds out it does not work?I think as farmers we need to be very careful not to align ourselves and become dependant on such payments given the pressure the country’s finance is under.
Those entitled farmers amongst us need some perspective, and start to think beyond what they think they are owed and maybe compare that to what is happening in the Ukraine and the demands that scenario might place on our country? There is no doubt now, that as our economy struggles and our government battles to kick-start growth, that there are going to be some major changes.
It is clear that the pressure is on to increase spending on defence by a substantial sum. Given the Chancellor’s response to top city bankers last week on non-doms tax, she was not for turning any more than she was on the Inheritance Tax occupying farmers up and down the country at present.
Maybe farming, just like defence needs a complete re-think?
A fresh look at what is needed and how we go about producing that? After all, once the nation is secure through good defence, it needs to be fed. Those are the two most important aspects of a government’s job if we go back to basics. Everything else is on the periphery when it comes to it, despite how terribly important people think they are in delivering services and public good.
Whilst the government appears naïve and out of touch, they are right in that if farming is to thrive, the supply chain and the players within and connected with that supply chain, need to change the way they operate.
That would of course mean a mind-set change for the nation, food will cost more, and a greater part of disposable income will need to be spent on it. Most people who are used to plentiful cheap food supply, the likes of which could not be imagined 70 years ago, would see this as a retrograde step; going back to the 1950’s.
Perhaps it would in some respects, but other severe cuts to welfare and sickness benefits are being looked at by this government, indeed a line by line look at all government spending, with savings the main driver. Whilst running a government is not the same as running a business, there are some inescapable similarities, such as you can’t spend more than you have coming in without incurring more costs. There is also a real drive for efficiency, long overdue, on the NHS and other departments, by a Labour government! It is when considering these seismic issues that I would encourage farmers to think differently.
The Labour government was under huge pressure in New Zealand back in the early 1980’s, where major economic reform known as ‘Rogernomics’ (the finance minister at the time was Roger Douglas) were introduced, moving to the most extreme, open, competitive, free-market economy.
Agriculture took the brunt of these reforms as farming subsidies were stopped abruptly and farmers had to learn to live without government influence, interference and protection which took its toll on family farms. Others thrived with the new freedoms and lack of interference, but environmental measures and animal welfare have caught up with them since and of course land prices which has slowed down that pioneering entrepreneurial spirit somewhat. The important lesson as always is that the national government which followed retained those reforms, there was no going back.
NZ of course is very different to this country and produced far more food than its population can eat and became a huge competitive exporter around the world on the back of all that. We have a huge home market right here in the UK, one of the best in the world, but the food industry of which we as farmers are part of has not functioned in the way it should and land price increases, tax breaks, subsidies are all built into the price we are paid by large powerful companies for our food, and the price we are charged by even larger multinational companies who sell us most of our inputs and machinery.
Clever and tempting finance enable farmers with wafer thin margins to afford the very expensive tractors you have seen on the streets of London, but it all has to be paid for in the end.The consumer has been the main benefactor of this system, and I am not sure it has all been such a success? Food is taken for granted, many people don’t bother cooking, we have a serious health issue as a nation which is costing a fortune and farming is a closed shop with few exceptions gaining a foothold on the farming ladder as new entrants.
The price of land bears no relation to what it can produce, as subsidies and investors exploiting tax loopholes, have pushed the price through the roof. Just as houses have become investments rather than a place to live, land has followed, and farmers find themselves asset rich but cash poor.
This now makes farming look ridiculous, in that it appears absurd to work hard in all weathers for a third of what the asset would return if cashed in and invested. But farmers will farm, they are totally committed to producing food, we enjoy what we do, and we are driven to go on. Inherited farms often hang like millstones around the necks of young people who are qualified to do other things but feel duty bound to come home and farm, carrying on the family tradition.
How much longer can this last is the question we should be asking ourselves as an industry?
Yes, there are plenty of profitable successful farmers, but some of them are leading the IHT protests. Why? Because they cannot see how an inheritance tax which is half of the normal rate can be paid over 10 years interest free? Why?
There is something fundamentally wrong here in that either they are not nearly as successful as they would have us believe, or they don’t think their children should pay tax on a multimillion-pound inheritance as it would entail borrowing, or they don’t want to pay tax.
Ironically the last reason is the easier one to deal with as no one wants to pay tax. In many cases the income is not there, and the farm is in a fix as it is not profitable and a loan or IHT payments would be the end.
There are other farms which of course could pay IHT and whilst what you achieve in life through your own efforts is worth far more than any inheritance, to be handed a profitable business and not have to start from scratch is very different to new entrants when it comes to affording loans or borrowing.
I can see change coming and it will not be good for all, but it might put our industry on a better footing in the long run. We have had 78 years of support and revolution in our industry and few things last that long.