DEFRA Secretary Michael Gove used a keynote speech to the Oxford Farming Conference to say that if UK agriculture does not embrace change we will be left behind, and Brexit offers the opportunity to shape that change and how we meet the challenges ahead.
SUBSIDIES CONTINUE TO 2024
Mr Gove guaranteed farmers the same level of subsidy until 2024, but said that CAP was created for a post-war world which is no longer relevant.
He said: “Paying land owners for the amount of agricultural land they have is unjust, inefficient and drives perverse outcomes. Indeed, perversely, it rewards farmers for sticking to methods of production that are resource-inefficient.”
In his paper, Farming for the Next Generation, as well as moving away from subsidies, Mr Gove’s proposals for future agricultural policy are based on incentivising innovation and giving the farmers the tools they need to progress, maintaining the UK’s reputation for quality food and high welfare, and building on natural capital to sustain the countryside for the future. He is also aware of the Government’s responsibility to public health.
Mr Gove told his audience: “I want to ensure we develop a coherent policy on food – integrating the needs of agriculture businesses, other enterprises, consumers, public health and the environment.
“I want to develop a new method of providing financial support for farmers which moves away from subsidies for inefficiency to public money for public goods.
“I want to give farmers and land managers time and the tools to adapt to the future, so we avoid a precipitate cliff edge but also prepare properly for the changes which are coming.
“And I want to ensure that we build natural capital thinking into our approach towards land use and management so we develop a truly sustainable future for our countryside.”
Addressing both the pace of demographic change and the challenges posed by Brexit, Mr Gove said: “We can’t stop change coming, we simply leave ourselves less equipped to deal with the change. There is a tremendous opportunity for productivity in our farms. We have some of the best performing farms in the world and there is no reason why our farmers cannot lead the way in achieving better levels of productivity throughout adoption of best practice and new technologies.”
Touching on the vexed issue of migrant labour’s importance to farming, Mr Gove suggested that seasonal labour would still be easily available and looked to a future where labour-intensive farming was replaced by as yet undefined new technology.
The government now proposes to keep similar payments to the BPS available until 2024. The current EU payments may well end at the end of 2020 to tie in with the EU budget, and Mr Gove suggested that area-based support payments would be phased out over a longer period after that, but “we won’t perpetuate that forever”.
‘PERVERSE’ SUBSIDY SYSTEM BENEFITS THE WEALTHY
Responding to Michael Gove’s speech, Professor Ian Bateman, Director of the Land, Environment, Economics and Policy Institute (LEEP), at the University of Exeter, said: “Michael Gove’s reaffirmation that the public money supporting farm subsidies should be spent on delivering public goods is to be welcomed; if this is carried through then he will deserve to be congratulated on breaking more than four decades of failure in agricultural policy. But it is disappointing to see that the system of paying most subsidies on a per acre basis is going to carry on for several years.
“At present 75% of public subsidies go to just 25% of farms; the largest farms in the country. This rewards multi-millionaire estate owners while other farmers remain in poverty. I have no problem with large farms getting payments if they produce high levels of public goods; but to get these payments just because they are large is perverse. It’s good to hear that this scheme may be capped, but it needs to end.”
INCENTIVES SHOULD TARGET ANIMAL WELFARE
RSPCA head of public affairs David Bowles said: “Paying farmers to achieve high animal welfare standards is a no-brainer. Farm subsidies targeted at animal welfare will be good for new trade deals, good for consumers and good for the animals.
“If post-Brexit farm support schemes include ring-fenced incentives for farmers to improve animal welfare, the government’s laudable ambitions for the UK to produce the highest quality food will be met. This, coupled with Environment Secretary Michael Gove’s newly announced comprehensive food labelling system which includes, amongst other things, indicators on animal welfare standards, would be the icing on the cake.
“As the UK leaves the EU and nationalises the farming support system this presents us with a once-in-a-generation chance to radically transform the Common Agricultural Policy (CAP) into a British policy for humane animal and sustainable land management.
“If we get it right now, the UK’s food quality can become the world’s gold standard – and that can only happen with the highest possible animal welfare.”
The RSPCA also welcomed Environment Secretary Michael Gove’s commitment to a much more comprehensive food labelling system that measures how a farmer or food producer performs against a number of indicators, including animal welfare.
ENVIRONMENTAL INCENTIVES WELCOMED
Helen Browning, CEO of the Soil Association said: “We warmly welcome the move towards an agricultural policy that prioritises environmental protection and the new emphasis on the vital links between food, farming and public health. The clear timetable provides much-needed certainty for farmers, whilst the commitments on public procurement and better labelling are important for food producers and consumers alike. We now need to see more detail on how farmers will be enabled and encouraged to shift to higher animal welfare systems, move away from synthetic pesticides, restore degraded soils and improve water quality.
“We don’t see these proposals as leading to a reduction in UK food production – but rather about a fundamental shift in how we produce food so that farming systems are truly sustainable. In many areas, we want to see more domestic production to meet demand, especially fruit and vegetables and organic.
“The greatest test of this transition is whether the UK’s food and farming system measures up to the monumental challenges of public health, which was highlighted in the speech, and climate change, which received just two mentions. The Government must also make an ambitious and unambiguous commitment to organic and other agro-ecological approaches which are proven to deliver on animal welfare, biodiversity, soil health and climate change – both during the transition and after 2024.”
CAP BAD FOR THE COUNTRYSIDE
Countryside Alliance Chief Executive Tim Bonner said: “Michael Gove’s speech confirmed the direction of travel for British agricultural policy post-Brexit.
“The move away from area based payments to rewards for delivering environmental and public goods is far from the revolution some have hailed, but it will be significantly accelerated by a departure from the Common Agricultural Policy.”
Mr Bonner continued: “Interestingly, just about the only thing that all sides of the Brexit argument, from the Liberal Democrats to Farming minister and Brexiteer George Eustice, seem to agree on is that CAP has been bad for the countryside, consumers and farmers. Attempts to reform the CAP have been achingly slow as the EU convoy moves only at the speed of the slowest. Brexit creates an opportunity for the UK to create our own farming policy for the first time in more than 40 years and move ahead of the pack.”
However, Tim Bonner sounded a cautionary note: “That is the good news, but there are also valid reasons for concern. There remains an inherent contradiction between agricultural productivity and protecting the environment which has not yet been addressed in detail by the Government and which goes to the heart of the big long-term question: how much will the public be willing to continue to pay for the countryside that farmers maintain?
“Under the CAP the question of farm support has been decided in Brussels and the combined weight of the European farming lobby has had a significant influence. Post Brexit levels of farm support will become a direct domestic political issue for the first time for a generation. The farm support budget will have to compete with the NHS, Defence, Education and all other areas of Government expenditure in future spending rounds. In order to maintain levels of support farmers will have to persuade the public, and through them politicians of all parties, that the public goods they provide continues to justify the money they receive from the taxpayer. This will be the greatest challenge for UK farming outside the EU.”
‘A TRIUMPH OF HOPE OVER PRACTICALITY’
TFA Chief Executive George Dunn said “We are used to having our hopes dashed of hearing a meaty Oxford Farming Conference speech from incumbents as DEFRA Secretaries of State but not this time. Like or loathe what we heard, we received a fairly firm view of future Government policy, the like of which we have not seen since Hillary Benn’s speech in 2010 in which he set out his 20 year plan to boost domestic food production. That plan fell by the wayside when Labour lost the 2010 General Election later that year and we will have to wait to see if the Gove plan survives the political choppy waters of our time.
“Disappointingly, there was a triumph of hope over practicality in the extent to which Mr Gove seems to be relying upon technological change to provide the swift answers we need to address labour shortages and the urgent need to increase farm productivity. Also on the negative side, there was nothing said specifically about the tenanted sector of agriculture, and there also continues to be too much reliance on the market being the means by which we sort out our food safety and food standards issues in a free trading environment.” said Mr Dunn.
“On the plus side there was a clear understanding of the need for a sufficient period of transition to a new policy framework. A commitment for the Government to act as a strong champion of British produce at home and abroad. A pledge to deal with market failure in the food chain and a promise that no one entering into an agri-environment scheme today will be disadvantaged when new schemes are developed for the post Brexit era,” Mr Dunn concluded.
FUW WANTS ‘MEAT ON BONES’
The Farmers’ Union of Wales described the as welcome, but says Welsh farmers remain in the dark over many important issues.
FUW President Glyn Roberts said: “We very much welcome Mr Gove’s apparent commitment to agricultural funding until 2024, and the general thrust of his speech, which described a prosperous and forward looking post-Brexit industry which is rewarded for delivering the very best in terms of food, the environment and social contributions to society.
“However, the nuts and bolts of turning such a vision into reality are where the obstacles will lie, and we look forward to seeing more meat on the bones in the long-awaited DEFRA white paper, due in the spring.”
Mr Roberts said many Welsh farmers would also be concerned that nothing was said about progress on talks between devolved regions on how devolved powers and funding might operate once we leave the legal framework of the Common Agricultural Policy (CAP).
“Wales currently has devolved powers over agricultural and rural development spending and policy, but this is within the limits laid down in the CAP framework.
“The FUW fully supports such devolved powers continuing. But, we now need to ensure that devolved powers are fully respected by all 4 nations and that we don’t see the creation of support mechanisms that benefit one nation over another. Therefore we need to develop a UK framework which ensures equivalence between producers in the four nations, which respects devolved powers and allows a degree of flexibility.”
While acknowledging that this was a difficult balance to strike, especially given political differences between devolved regions, Mr Roberts said progress was necessary.
“We currently have such a system, so it is not difficult to see how a framework could be developed which strikes a sensible balance between respecting devolved powers and avoiding the dangers of a free-for-all.”
Mr Roberts said reaching sensible agreement on spending frameworks should be a priority, in order to avoid inappropriate and unfair divergence between spending areas in devolved nations.
He also emphasised the need for Mr Gove’s vision for the future of UK agriculture to be underpinned by an acceptable post-Brexit trade deal with the EU.
“I therefore welcome his fellow speaker’s, Professor De Castro’s, confirmation of the EU’s desire to ensure tariff-free trade between the UK and EU post-Brexit,” he added.
Mr Roberts also welcomed USA Under-Secretary McKinney’s comments regarding the desire to increase agricultural trade between the UK and US, but warned that care needed to be taken to ensure any new arrangements did not compromise existing markets.
“Standards in the US are very different to those in established UK and EU markets, and we need to ensure new arrangements do not compromise or undermine established markets.”
A vision for Welsh upland farming
A NEW NFU Cymru report highlights the unique contribution that the Welsh upland farming community makes to food security, environment, the economy, rural communities and the Welsh language.
The NFU Cymru Vision for Welsh Upland Farming report, which was underpinned by a survey of over 750 farmers, was launched at the Vision for Welsh Upland Farming virtual conference on Tuesday, November 24.
The document reveals that 96% of farmers surveyed believed their role as food producers was very important or fairly important, with 95% saying that food production and sales were very important or fairly important to the viability of their business. 88% said it was very important that future Welsh agricultural policy should underpin food production and ensure consumers have a stable supply of affordable food.
The biggest worry for Welsh upland farmers to surface from the research was farm business profitability, with 85% of those questioned stating this was a ‘significant threat’ to the sector. The vast majority of those questioned (92%) said it was vital that future Welsh farming policy included measures that ensured farmers could make a reasonable living. However, just 18% of farmers answering the poll felt Welsh Government’s Sustainable Farming Scheme proposals to replace the CAP were very good or fairly good at specifically addressing the needs of upland farming, with 37% labelling the proposals fairly poor or very poor.
With the Brexit transition period coming to an end, 84% of farmers surveyed said that future trade deals were a significant threat to upland farming, while 80% stated that future policy was a significant threat.
NFU Cymru said the findings of this research work provide ‘another compelling argument’ as to why future Welsh agricultural policy should include a stability measure to help ensure the safe supply of food and as an economic foundation in rural communities, alongside the other multiple benefits provided by Welsh farming, amid changing trade and climate conditions.
The new NFU Cymru study also shined a light on Welsh upland farmers’ attitudes towards the environment. 80% of those surveyed had carried out one or more environmental actions on the farm in the last 10 years, while 83% said that future policy measures to tackle climate change were very important or fairly important. 54% of farmers surveyed were in Glastir agri-environment schemes and together had delivered more than 70 different environmental actions on Welsh farms.
The survey data further emphasises farmers’ role as drivers of the rural economy. 30% of farmers surveyed said their business supports or buys from 21 to 50 different businesses, with a further 10% stating that their business trades with or buys from more than 51 other businesses.
The important contribution of Welsh upland farming to rural communities and Welsh culture was also revealed. 83% of respondents were involved in one or more voluntary activities within their community, while over half of those answering the survey identified themselves as fluent Welsh speakers.
Diversification remains an important income stream for many Welsh farms; 43% of farmers responding to the survey stated that they had a non-farming element to their business. The most popular diversification enterprises were renewable energy (43%) and accommodation (42%).
Discussing the importance of NFU Cymru Vision for Welsh Upland Farming project, NFU Cymru LFA Board Chair Kath Whitrow said: “In recent years, despite their extent and significance, we have seen upland farming policy de-emphasised. As our relationship with the EU changes, the economic rationale for upland livestock production is threatened. Global environmental challenges, such as climate change and biodiversity decline, are viewed by some as drivers for land-use change without any consideration of the wider impacts.
“At this pivotal time for Welsh farming as we transition out of the CAP and into a new ‘made in Wales’ agricultural policy, the NFU Cymru LFA Board wants to ensure that the voice of Welsh upland farming is clearly heard in this debate. This is a message that has resonated strongly with Welsh upland farmers and, despite the limitations placed on us as a result of Covid-19, the voice of farmers across Wales has been clearly heard with our survey attracting a fantastic number of responses.”
NFU Cymru President John Davies said: “The Vision for Welsh Upland Farming report launched at today’s conference is one of the most comprehensive pieces of research work undertaken by NFU Cymru. Its findings are of strategic importance not just to the people living and working in the Welsh uplands, but to the whole of Wales.
“This research provides another compelling argument that future Welsh agricultural policy should include a stability measure to support farmers by protecting them against the increased volatility that affects businesses, trade and production. Such backing would ensure our farmers can continue providing safe, affordable food, as well as boosting the economy, enhancing the environment, caring for our cherished landscapes communities and being champions of Welsh language, culture and rural communities.
“I urge our policymakers in Cardiff Bay to carefully consider the report’s key recommendations and work with us to ensure that the people and communities of the Welsh uplands can continue to deliver for the whole of Wales.”
Potato production up despite tough year
THE TOTAL harvest of British potatoes this year will be 5.3m tonnes according to provisional estimates – up two point eight per cent (2.8%) on last year’s figure but just below the five-year average of 5.4m tonnes.
This estimate by the Agriculture and Horticulture Development Board (AHDB) has been released during a time when growers have battled an exceptionally wet harvest period for the second year running.
They have fared better than last year, as on 10 November it was estimated that two per cent of the planted area was yet to be lifted. This compares with 11 per cent of the crop that was estimated to be unlifted on 12 November 2019.
This production figure follows an AHDB estimate that the planted area this year is the third-lowest on record.
Alice Bailey, Senior Analyst at AHDB said: “This overall net yield sits in line with the five-year national average (2015-2019). Anecdotal reports suggest that yields have been somewhat variable from farm to farm, even field to field. Yet overall, crops are within farm expectations so it is not surprising that the national yield is in line with recent years.
“We saw planted area drop by two-point three per cent this year, yet we are estimating a two-point eight per cent rise in production. This is based on both a slight increase in yields year-on-year and the fact that a large area was left unharvested last year. The unlifted area in 2019 was estimated at six per cent, whereas in 2018 less than one per cent was estimated to be left in the ground and we would anticipate similar this year.”
It was also noted that the estimate could be amended in the coming weeks, with 2.1Kha still to harvest in the East of England, and some members of the 450 strong AHDB Grower Panel still to return their survey information.
WINTER MARKETING CAMPAIGN
Meanwhile, Potatoes Strategy Director Rob Clayton announced that AHDB would be launching another promotional campaign in reaction to the market conditions caused by the coronavirus. This follows on from a similar campaign in the summer that reached 5 million shoppers via catch-up TV, social media and display advertising.
“Since the pandemic hit we have increased the amount of data we analyse from supermarkets and other areas of the marketplace. While potato sales at retail are up eight to nine per cent overall – analysis from Kantar Worldpannel shows baking potatoes lagging behind at a rise of three per cent.
“Jacket potatoes are a fantastic healthy and cost-effective option for families, so we will be launching a winter campaign to inspire shoppers to take advantage of all the great things they can do with bakers,” said Doctor Clayton.
Farmers should prepare for IHT changes
FARMERS should review their Inheritance Tax (IHT) and succession plans ahead of the Spring Statement as potentially significant changes are expected, according to rural accountant Old Mill.
There are less than six months before the Spring Statement, and changes to the IHT format – based on recommendations originally outlined by the Office of Tax Simplification (OTS) in July 2019 – are likely. “The recommendations were primarily geared towards streamlining IHT administration but may have the secondary effect of reducing some of the favourable reliefs available to farmers,” explains Catherine Vickery, associate director at Old Mill.
“Current IHT legislation can be very beneficial for farmers, giving confidence that they can pass down agricultural business and property assets to the next generation tax free on death,” she adds. “Unfortunately, the coronavirus pandemic has left the Government with a very large debt, so there’s potential that it will implement any OTS recommendations to increase tax revenue.”
So, with the Spring Statement anticipated for March, what can farmers do to mitigate any potential changes?
“Under the existing rules, agricultural land and property qualify for Agricultural Property Relief (APR) from IHT at up to 100%,” explains Mrs Vickery. Other land and property assets, like diversified enterprises, can qualify for up to 100% Business Property Relief (BPR) as part of an overall farming business which is at least 50% trading. “These reliefs can apply on lifetime transfers as well as on death where the conditions are met.”
Transfers on death currently also qualify for Capital Gains Tax (CGT) free uplift so that gains are effectively washed out. Lifetime transfers of agricultural land, property, and businesses which are at least 80% trading qualify for gift holdover relief, meaning gains can be deferred until a later disposal.
However, a key OTS recommendation is to remove the CGT free uplift on death when IHT relief is also available. This would mean that the next generation would inherit the farm at an historically low base cost, leading to higher CGT on any future sale. The OTS has also just released its report into CGT simplification which echoes this same recommendation. Proposals to alter the trading test for BPR, aligning it to the 80% CGT trading test could leave farmers ineligible for 100% BPR, which could result in assets having to be sold to pay IHT liabilities.
“The most tax efficient option has often been for farmers to continue to actively farm and hold onto assets until they die,” says Mrs Vickery. “Now, given speculation about potential changes, the best course of action is to get a succession plan in place as soon as possible and start implementing it.
“Plans need to be arranged based on what is right for you, your family and the farm right now, rather than how things might stand at a later date.”
This means establishing who is taking on the assets and if they have the skills needed to drive the business forward. “Pass over this responsibility while you still can and while you can be on hand to guide and support your successor,” advises Mrs Vickery.
It’s also important to review partnership or shareholder agreements, and consider the handing on of other assets. Additionally, farmers should collate any trust and gift deeds, so that paperwork is on hand to be reviewed.
“Though we suspect the new IHT rules won’t be favourable, farmers need to make use of the rules we have now as these are a current certainty,” says Mrs Vickery. “Succession planning is so easy to put off but it’s a vital tool in safeguarding the future of farming businesses.”
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