AS WE close the book on what has been an eventful year, I’d like to survey the events of 2019 and look ahead to see what is on the horizon in 2020.
We’ve just emerged from the third UK General Election in four years, following what has been a period of extraordinary political instability. The result of December’s election gives the Prime Minister the majority he has been seeking to take forward his Brexit plans. Although in legal terms we cease to be an EU Member State at the end of January, there is much work ahead to secure the access we need to our nearest and most valuable export market.
Although uncertainty persists, I am ambitious for our sector. Wales’ farmers have the skills, natural resource base and ambition from which to rise to future challenges and opportunities which lie ahead. These opportunities include increasing our self-sufficiency by producing more high-quality food, securing new export markers and becoming producers of the most climate-friendly food in the world by becoming zero net emitters of greenhouse gases by 2040.
Leaving the EU at the end of January based on the current withdrawal agreement means that we enter a transition period, during which time we continue to enjoy access to the EU’s single market. We must ensure that when that transition ends, we can access that market on the most favourable terms possible, with tariff and non-tariff barriers eliminated wherever possible. The UK’s government must also avoid a situation whereby the transition period elapses without having reached an agreement on a future trading relationship with the EU, culminating in us trading with the EU on WTO terms.
Trade talks with third countries will begin soon and one point I have been making consistently, and for some time now, is that we must not allow our own high environmental and animal welfare standards to be undermined in any future trade agreements that the UK may enter into. I, therefore, want 2020 to be the year in which the new government moves ahead with the creating of a Trade and Standards Commission, which will be tasked with ensuring our high standards are upheld and respected in any future trade agreements with third countries.
2019 also saw the second stage of the Welsh Government’s consultation on the future of agricultural policy in Wales. The ‘Sustainable Farming and our Land’ consultation followed its 2018 predecessor, ‘Brexit and our Land’, and we were pleased to see these revised proposals including future support around the principle of sustainability. The union remains concerned, however, that the proposals suggest the continued supply of vital economic, social and cultural benefits provided by Welsh farming currently can be secured through what is, essentially, an agri-environment scheme. I’d like to once again thank all farmers and those living in our rural communities who responded to the consultation. We now wait for the Welsh Government to analyse the responses and bring forward the next stage of the process in 2020.
Sadly, as we welcome in the New Year, around 650 cattle farmers in Wales are affected by bovine TB restrictions and this, of course, has a significant knock-on effect on their business and family. NFU Cymru continues to lobby the Welsh Government to review its bovine TB eradication strategy and deliver a more holistic policy that tackles this disease across all its vectors. A peer-reviewed scientific report examining the effectiveness of badger culling in reducing outbreaks of TB in cattle has shown positive results in Gloucestershire and Somerset and we now look to Welsh Government to listen to the science and use all of the tools at its disposal to control the reservoir of disease in wildlife – not just through cattle controls. We also need the Welsh Government to look at the support for chronic herds in Wales and the massive impact long term breakdowns are having on these businesses.
On the dairy side, we look forward to a long-awaited consultation on statutory milk contracts. There are examples of good practice out there but what other industry would allow six weeks of payments in arrears and for processors to adjust prices at a whim? Of course, we want processors to have successful profitable businesses, but we need the same for our milk producers. After all, these are the people taking the price risk when product prices fall. This has to change as evidenced by the latest Welsh Government farm statistics when dairy farm income fell by a massive 43% in the year ending March 2019 compared to the previous 12 months. Statutory contracts will help bring back some stability which the sector needs right now.
Against the backdrop of Brexit uncertainty and low market returns, the threat of regulation continues to weigh heavily on farmers’ minds. Back in November 2018, the Welsh Government announced regulatory measures covering the whole of Wales to protect water quality from agricultural pollution coming into force in January 2020. From information provided by the Welsh Government in early 2019, it is clear the proposed new regulations are whole territory Nitrate Vulnerable Zones (NVZ) with the NVZ Action Programme requirements applied across the whole of Wales.
The Minister, in December 2019, confirmed that she will be considering advice from officials in January on the introduction of agricultural regulations following further engagement. NFU Cymru categorically rejects any proposals which include the introduction of the Nitrates Directive and Nitrate Vulnerable Zones (NVZ) across the whole of Wales. This is based on the evidence which shows an all-Wales approach simply cannot be justified; that the existing NVZs in Wales have had limited effectiveness. The great harm an all-Wales NVZ will do to farm businesses and our rural communities, which greatly outweigh any benefits to water quality, cannot be justified. We are clear, an all-Wales NVZ approach is not evidence-based, proportionate or targeted and we continue to work tirelessly to emphasise to Welsh Government the devastating impacts that an all-Wales NVZ approach will have. We urge the Minister to recognise that poor regulation serves no one – not government, not society, not the farming industry or the environment – and work with us to develop the framework to support farmers to take action to improve water quality where this is needed.
2019 has also been a year when the glare of the media on Welsh and British farming has not been as balanced as we would expect. I have long said that, as an industry, we are not immune from critique and we relish the opportunity to stand up and promote our values and leading standards. What we do not and will not accept, however, is unbalanced reporting and false news pedalled by those with an agenda against farming. This year NFU Cymru has shown we tackle such behaviour through robust complaints and other means. Please be assured that we are prepared to escalate our actions accordingly if required.
There will no doubt be huge challenges facing our industry in 2020 and beyond. As an industry, we should all be very proud of the role we play and we must remain steadfast in our ambitions to continue to deliver for the people and communities of Wales. As an organisation, NFU Cymru is ambitious for Welsh food and farming. Politicians in both Cardiff and Westminster must commit to working with us to deliver our ambition for a productive, progressive and profitable farming sector that delivers for the whole of Wales
NFU Cymru President’s New Year message
NFU Cymru President John Davies provides his New Year message, looking back over an unprecedented 12 months and assessing what lies ahead in 2021.
“2020 was a year the likes of which we’ve never seen. The Coronavirus pandemic has challenged all of society. My condolences go out to all of those who’ve lost loved ones to this disease. My thoughts are with all whose livelihoods have been affected by the knock-on effects that the pandemic has had on businesses and our general way of life. I’d like to place on record my heartfelt thanks to our NHS workers and those supporting them on the front line for their courage in tackling this global health emergency. So often the term ‘hero’ is attached to those in films or on the sporting stage, but if this year has taught us anything it’s that, in fact, the real heroes are those people in our communities who have gone to work – putting themselves at risk – to care for the sick and keep the rest of us safe. Diolch yn fawr iawn pawb.
“The initial impact of the Covid-19 outbreak and the overnight closure of the hospitality sector had severe consequences for the food supply chain. The resilience of those systems was stretched to the limit as the supply chain frantically sought to redirect produce that would usually be destined for the out-of-home market to the retail sector, where panic-buying had resulted in empty shelves in many stores. I thank all our farmers who have worked throughout the chaos of the Covid-19 fallout to keep the nation fed. I know that for many businesses and sectors this hasn’t always been easy and some experienced significant losses as those supply chains struggled to adapt to new demands. However, the role the entire industry has played during such a fraught period will live long in the memory of many, and indeed recent polls suggests farmers’ favourability with the consumer is higher than it has been in a decade.
“I very much hope that lessons can be learned from this tumultuous year and if the past few months have taught us anything, it’s that the safe, reliable supply of high quality affordable food is now of paramount importance to the public. As farmers we are ready and committed to ensuring that the nation remains fed during this difficult time and through future challenges, too. Our farming systems, underpinned by a fantastic, natural asset base, mean we are well equipped to be the providers of the most climate friendly food in the world. NFU Cymru will continue to lobby Welsh Government to see the importance of food production recognised and protected as a cornerstone of future policy.
“Looking ahead and, with significant changes to how Wales and the UK trades with the EU and the rest of the world, one of the biggest challenges for 2021 is going to be making sure that Welsh farmers have the widest possible range of markets freely open to them, on the best possible terms. We are, of course, relieved that that a deal has finally been agreed between the UK and the European Union, providing some much-needed certainty for the farming sector and allowing Wales’ farmers to continue to send products to the EU27 free of both tariffs and quotas. All efforts must be now be focussed on finding ways of minimising the impact of red tape on the movement of our produce to the EU.
“A heartfelt thanks must go to the one million people from all walks of life who backed our food standards campaign. Their support was instrumental in delivering legislation to ensure that food standards will now have a ‘stronger voice in UK trade policy’.
“Of course, away from the pandemic and agricultural policy, there are still major issues that are affecting the nation’s farmers every day. Bovine TB continues to blight so many businesses across Wales – all too many times this year I have again learned of families’ heartbreak and herds, generations in the making, being decimated due to this horrific disease. Please be assured that NFU Cymru will continue to pressure government to act upon the science and take notice of the proven strategies adopted by so many other countries – an approach that seeks to tackle bovine TB across all its vectors.
“NFU Cymru maintains that a heavy-handed and inflexible approach to water quality through the proposed all Wales Nitrate Vulnerable Zone (NVZ) designation will not deliver the enhancements to water quality that we all want to see. NFU Cymru is committed to helping to deliver these improvements via an effective and proportionate framework that supports farmers to take action to improve water quality where it is needed. I am heartened that our Minister has recognised that these are not regulations to introduce at a time of crisis.
“Climate change remains a major challenge for all of us in society and the farming industry is putting its best foot forward to deliver on its net zero 2040 ambition. With the prestigious COP26 summit rescheduled to be held in Glasgow in 2021, it is clear this topic will, rightly, remain high on the news agenda next year. As a farmer, it’s important to me that farming’s contribution to mitigating the effects of climate change is fairly reflected in this debate. Recent research has pointed to the fact that Welsh livestock production systems are amongst the most sustainable in the world, but we know that there is much more we can and will do.
“With a Senedd election scheduled for May 2021 we will be speaking to candidates from across the political spectrum to push home the importance of Welsh food and farming. We are committed to working with the next government to deliver our ambitions for a productive, profitable and progressive farming sector that delivers for the people and communities of Wales.
“It has been a year like no other. With the vaccine rollout now underway I hope we will soon be able to consign the last pandemic-hit year to the history books and return to some form of normality, where we can soon meet at the agricultural shows and events that we all hold dear to our heart. Let us look ahead to 2021 and what we hope will be a bright, healthy and safe future.
“Blwyddyn Newydd dda.”
Farmers face hidden tax hike
POTENTIAL changes to rules on Capital Gains Tax could lead to a tax hike for those inheriting farmland and assets, financial advisers at NFU Mutual have warned.
Many farmers can potentially pass on farms to their children free from Inheritance Tax due to Agricultural Property Relief and Business Property Relief.
As capital gains are wiped away on death, children inheriting can sell and only face Capital Gains Tax on any rise in value between the date of death and a sale.
However, in a review ordered by Chancellor Rishi Sunak, the Office of Tax Simplification has recommended that gains should no longer be wiped away on death where the estate has claimed Agricultural or Business Property relief to reduce Inheritance tax.
Sean McCann, Chartered Financial Planner at NFU Mutual, said: “Many farmers choose to hold on to their farming assets until death on the basis that not only might they be free of Inheritance tax, but also escape Capital Gains Tax if sold shortly after death.
“The Office of Tax Simplification’s recommendation that gains should no longer be wiped on death where Agricultural or Business Property relief has been claimed to reduce inheritance tax will mean bigger tax bills for some farming families.
“The biggest impact will be on those who sell farming assets they’ve recently inherited. Those that retain the assets and continue to farm won’t face any immediate tax liability under the proposed changes.
“The Office of Tax Simplification also recommended a hike in Capital Gains Tax rates that would align them to Income Tax rates, leading to larger tax bills.
“However, it’s likely that any change would be accompanied by an allowance to take account of the rise in value caused by general inflation, so any tax is only levied on ‘real’ gains.
“It’s important to stress Rishi Sunak has not yet confirmed he will agree to these recommendations, but many farming families will be watching the March Budget with interest.”
A farmer owns a farm worth £1m which he bought 25 years ago for £300,000. He dies and leaves it to his children, who sell for £1m shortly after his death. Under current rules, if he met the criteria for 100% Agricultural and Business Property relief, they would pay no inheritance tax on the £1m and no Capital Gains Tax on the sale.
Under the proposal to abolish the tax-free update on death, while there would still be no inheritance tax due – if the farmer’s children sold shortly after his death, they would face a Capital Gains Tax bill on the £700,000 gain. Based on the existing rate (20%) that would trigger a Capital Gains Tax bill of £140,000.
“It’s important to stress Rishi Sunak has not yet confirmed he will agree to these recommendations, but many farming families will be watching the March Budget with interest.”
Consumers ‘sleepwalking’ away from meat
A LACK of inspiration, rather than a conscious reaction to trends such as veganism, was at the heart of the pre-Covid-19 reduction in meat, fish and poultry consumption, new AHDB research has suggested.
Before the pandemic struck, some 7.8 million (35%) households in Great Britain had unwittingly purchased less meat, fish and poultry products, according to AHDB analysis of Kantar data [52 w/e 26 January]. This figure accounted for 99% of the 1.3% volume drop in retail sales.
However, the twenty per cent of households which had at least one ‘conscious meat reducer’ accounted for just 1% of the losses, with the majority citing other reasons for reducing consumption.
The unconscious reducers were said by the report to mostly be of retirement age and living with fewer people. They were found to be much less likely to experiment with cooking or refer to themselves as a ‘foodie’, preferring more traditional dishes. They were also found to be unsatisfied with shopping for meat, with just 29% of the unconscious reducer group saying they enjoyed browsing meat aisles and only 31% find them to be inspiring.
The report urged the meat industry to focus its efforts on winning this group back as they offered a better route to boosting meat consumption than conscious reducers.
“How unconscious reducers think and feel about meat isn’t any different to those people who are actually increasing their meat consumption – they’re not turning away on purpose so there is a chance to re-engage them with the category,” explained one of the report’s authors, AHDB senior retail insight manager Kim Malley.
“The biggest opportunity is at the point of purchase. The key thing the report highlights is those people are wanting a better in-store experience. There could be simple messaging in-store to remind people why they enjoy meat, give them a bit of inspiration and remind them it’s versatile and convenient.”
Malley added the meat-free category is “excelling” in innovation and convenience through ready-meal and marinated NPD – products which the report said the meat industry had invested less heavily in.
She also praised the packaging of meat alternatives, which tended to be “very colourful and brought recipes and flavours to life” for shoppers, and urged the meat industry to do its own innovation in these areas in a bid to win back “distracted” consumers.
According to the report, distractions included negative media coverage of the meat industry and the prominence of plant-based ranges in stores.
But in positive news for the sector, it found the coronavirus pandemic had seen sales volumes of meat, fish and poultry rise 8% year-on-year in the 52 weeks to 6 September. Unconscious reducers were discovered to have accounted for 35% of this uplift.
Malley said meat “benefited massively” from the rise in in-home occasions this year and consumers thinking more about their food choices. “It has highlighted that it’s quite easy to re-engage people,” she said.