British farmers have nothing left to give

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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

The writer is president of the National Farmers’ Union

This Budget was meant to be all about growth. It was an opportunity for the new government to deliver on its promises, reset its relationship with the countryside, as the prime minister said he would, and invest in the largest manufacturing sector in the UK — food and drink. Instead, it’s taken the legs out from under the primary producers of the sector, farmers. 

The changes announced will place a further burden on British farmers that — already navigating the most challenging landscape in years — they simply cannot bear. After years of being squeezed to the lowest margins imaginable, farmers are grappling with skyrocketing production costs for fuel, feed and fertiliser. Coupled with significant post-Brexit policy shifts, and increasingly extreme weather conditions, there is nothing left for our nation’s food producers to give.

The Budget will only exacerbate the costs associated with food production, and where will those costs fall? The supply chain? Consumers? The reality is stark. Most farm businesses already operate on razor-thin margins, often yielding less than 1 per cent return per year. They’re down to bone and gristle as it is.

While lots of smallholdings and houses with a few acres let for grazing may manage under the new inheritance tax (IHT) policy, very few viable farms are worth under £1mn. That could buy you 50 acres and a house today. In fact, the average farm in England is 217 acres. And while the asset value of genuine food-producing businesses is often high, this doesn’t reflect their profitability, which is often and increasingly very low.

Together with impending hikes in employers’ National Insurance and increases to the National Living Wage, many of these businesses will not be able to absorb the financial strain. Changes to Agricultural Property Relief (APR) and Business Property Relief (BPR) are set to push them over the edge.

Nor do Treasury figures accurately reflect the impact of these changes on rural communities. They claim that approximately 25 per cent of farm estates will be affected by the £1mn IHT threshold. This skewed view of the structure of farming in the UK is the foundation on which this misguided policy is built.

These figures are based on past APR claims and do not consider farms that have also claimed BPR for diversified aspects of their businesses. They also include a substantial number of small holdings, with 27 per cent of those Treasury figures being for assets under £250,000, and another 23 per cent for those under £500,000. For anyone who has attempted to buy land recently — evidently, no Treasury officials — this translates to just 10 to 40 acres, an impractical size for a viable farming operation. Put it this way, if you can buy a viable, food-producing farm for under £500,000, I encourage you to do so. It would be a first.

In reality, I estimate that at least half, if not more, of family farm businesses actually producing food and providing jobs in rural areas could be adversely affected by the IHT changes. Many will struggle to meet the 20 per cent charges without having to break up their farms, ultimately making most operations unviable. If this family farm tax isn’t scrapped, many will be forced to sell altogether.

To compound these challenges, the Budget revealed that farmers’ support payments would be phased out at a faster rate than anticipated in the transition to new environmental schemes. But many of these new schemes aren’t ready and some that have been launched haven’t been fit for purpose. Hence Defra’s giant £350mn underspend. The Secretary of State for Environment, Food and Rural Affairs recently stated that “we all are going to have to do more with less.” But the truth is, there is nothing left.

This disconnect illustrates a profound lack of understanding from the Treasury and the government of the value of family farms and how they operate. These farms are the backbone of our countryside and the foundation of our food industry.

For the sake of food security and legislated environment targets, I, along with the NFU’s 45,000 members, implore the government to reverse its decision to impose new taxes on family farms. I look forward to seeing dozens of new rural Labour MPs on Tuesday November 19 when farmers will be holding a mass lobby in Westminster to ask their MPs whether they support this policy.

We all must bear in mind the words that our now Prime Minister made at the NFU conference just last year. “Losing a farm is not like losing any other business, it can’t come back.”