Welcome to our summer edition of Farming Matters. A lot has changed since our last issue and most of our conversations and the underlying theme of…
This interview was originally published in the Western Morning News on Wednesday 24 March 2021 and was carried out by the Western Morning News’ Farming Editor Athwenna Irons.
In what’s been a turbulent and strange twelve months, the Western Morning News’ Farming Editor Athwenna Irons catches up with Brian Harvey, partner and agricultural accountant at PKF Francis Clark in Truro, through the power of video call to get his thoughts on some of the key talking points for the farming industry today.
Q: On March 3, Chancellor Rishi Sunak unveiled his Spring Budget for 2021. Are there any significant tax changes which farmers and rural businesses need to carefully consider?
It was a very eagerly anticipated Budget, but the key takeaway points for farmers were those that weren’t actually mentioned. So the fact that the Budget was silent in terms of Capital Gains Tax and Inheritance Tax was, I think, the most important thing for the agriculture sector. There had been some reports about how Capital Gains Tax rates should perhaps be pushed up as a way of raising revenue and that allowances should be cut. There’s also always the talk about Agricultural Property Relief and Business Property Relief for Inheritance Tax, and whether or not that’s too generous and used inappropriately – so there was definitely a bit of the fear factor in play.
We did quite a lot of succession planning before the Budget and thankfully, if you like, we’ve got a slightly extended window of opportunity to do more of that. I still think that at some point in the near future, these things are going to come back onto the political agenda. Maybe the fact that we’re still in lockdown meant they got pushed back, but it’s not gone away forever so now is a good time to do some succession planning – there’s never been a better time really. I can’t see many tax rates coming down anytime soon, so with tax rates going up now is the time to plan and look at how your business is structured going forward.
Another takeaway from the Budget which will have impacted quite a few farm businesses was the extension of the 5% reduced VAT rate for the hospitality industry. That’s been very helpful for those diversified farm businesses with bed and breakfasts, holiday lets and the like.
Q: Since we last spoke in February 2020, we’ve seen the Agriculture Act 2020 pass into law, along with the formation of the long-awaited Trade and Agriculture Commission (TAC) in July 2020. In a recent report published at the start of this month, the Commission set out a series of principles, areas of action and recommendations which it says the Government should aim to adhere to in trade talks – with the overarching theme of striking a balance between the liberalisation of trade and making sure that British farmers are not undermined by substandard food imports. Now that the UK has officially left the EU, just how important is the UK’s post-Brexit agri-food trade policy going to be for not only farmers and producers, but the consumer too?
Clearly, what matters ultimately is whether or not the recommendations of the Trade and Agriculture Commission are taken on board, and how much political clout they may have. In principle, I think everyone would agree with what was said in terms of the need to balance trade with maintaining higher food standards. We’re looking for an even playing field, but the difficulty being that this is going to be a negotiation which will involve some trade-offs and big decisions. In practice, Parliament will have the final say and ‘money talks’. There will be winners and losers and there’s no long-term guarantee.
It is the case that whilst agriculture and food is very important to the rural community and economy, there are bigger markets and sectors out there which carry a heavier influence. So whilst the right sounds are being made and fingers crossed the TAC’s recommendations will be adhered to, I still personally have concerns about where we may end up. As far as I can see, there’s no political will for any food inflation. The price of food is low, too low in my opinion, but I can’t see that any Government – given the level of national debt we have at the moment – is going to want to do anything that’s in any way inflationary, so that probably puts us at a disadvantage when we’re negotiating with a country that can provide a product perhaps of a lower standard, but at a lower price.
I’m not convinced that everyone is as interested in anything other than the price of food. I know a lot of people will talk about where the food has come from and the environmental standards behind it, and if ever surveyed would say they would buy British, free range, organic and such like. All of the surveys say that, but I’m not sure that if you asked any of the supermarkets for their data as to what they sell … there’s a difference what you do when answering a survey and what you do when you go on your weekly shop.
Q: It’s been a turbulent year for agricultural shows, with a number of organising committees having already announced date changes and even cancellations for 2021. Can you sum up for us just how important these events are to the South West’s farming and rural community – both physically and mentally as a place to socialise?
They’re absolutely fundamental and right at the centre of everything that is good about the agricultural community. Clearly we’ve all missed seeing our family and friends over the past year, but many will have also missed going to the shows – the Royal Cornwall for me in particular – that we admittedly take for granted. They don’t need writing in the diary as you just know when they are.
Agricultural shows, livestock markets and other events are an opportunity to get out, see friends, share ideas and just have some fun, which there wasn’t a huge amount of in 2020. I really hope a lot of the shows can happen in 2021 as it gives people something to look forward to after such a long, difficult time. If they are held later in the year, I hope that they are as well supported as they would normally be.
In terms of mental health, there’s a lot of good work being done now by various charities and organisations to promote farmers’ wellbeing. I think a lot of people in the last 12 months have experienced more of a farmers’ way of life, in terms of a lonelier existence. Covid-19 has seen us all locked down and for a lot of farmers, maybe through choice but also because of the need to be on the farm, they don’t go very far from home and the only other person they might see each week is the milk tanker driver or the bank manager. It’s a hard way of life.
Q: Earlier this month, we saw Morrisons pledge to be the first supermarket chain to be completely supplied by net zero carbon British farms – setting a target of 2030 to achieve this. If not already, is this something that farmers in the South West need to be taking more into account in the day-to-day running and future-proofing of their businesses?
In principle, I think it’s a great idea. As a target 2030 is very ambitious, but if you don’t aim for something then you won’t achieve it.
Farmers are certainly aware of the issues around climate change and reducing emissions but, if I’m being honest, I’ve not come across many who are actually doing anything directly about it. I’ve seen maybe two or three clients who have undertaken work to find out what their current carbon footprint is.
I think it will be interesting to see how Morrisons work alongside their producers to achieve net zero. Are they just going to say that if you’ve not reached the  target we’ll find someone who has, or are they actively going to work with suppliers to establish what their footprint is and how that can then be reduced down to nil? Supermarkets like Morrisons have an important part to play and if they can work with their suppliers, who in turn can perhaps share best practice with other farms in their area, then that could be a really positive thing for the industry.
But farmers can’t be expected to do it for nothing. So if farmers are going to be told that they need to be net zero to supply Morrisons, but in order to do that have to incur additional costs to reduce their carbon emissions and are also not being paid extra for their product, then already very tight margins are going to be squeezed further and that’s not sustainable. A lot of the supermarkets make fantastic noises when it comes to supporting British farmers, but don’t necessarily follow that up when negotiating a fair price for their produce.
Q: And of course since we last spoke, Covid-19 has happened! The pandemic has sought to highlight the public’s support for British farming, most notably with a significant increase in buying local and greater appreciation for the work farmers do to keep the nation fed. How can the British food and farming industry now build upon this and keep the positive momentum going?
It’s quite ironic that farmers have voted against the compulsory levy to fund AHDB Horticulture, as this is the exact point in time where the AHDB has a very important role to play in promoting British agriculture. No grower of carrots, for example, has sufficient individual power to run a big national advertising campaign to promote eating British vegetables, but the AHDB does.
It’s about working together and I think that’s where we’ve got to go as a sector, using those levies more strategically to get better promotion which would benefit all. Now is definitely the time to keep promoting British agriculture, the quality of the produce and all the hard work and effort that goes into growing crops and rearing livestock.
In the first lockdown there were a few supply chain shocks and horror stories, particularly of milk being thrown away at a time when the supermarket shelves were empty. But it wasn’t such a bad thing for the farming sector, in terms of making people a bit more aware of just how fragile the food supply chain actually is. There’s nothing better in a way for British farming than empty shelves, although I’d rather that was caused by bad weather than a global pandemic!