Friday, March 23, 2012

March 23

A less than neutral budget

Farming didn't get a mention in the Budget speech, but that doesn't mean it will have no effect on farming. In fact, the long term consequences could be quite considerable.

ON FUEL, the Chancellor is criticised for not giving an inch on the rising cost of fuel prices, and the confirmation of the increase in fuel duty this summer will surely make things harder for people in the country.

The answer is going to be greater economies on the farm. Fuel consumption is going to be of greater consideration when choosing tractors and machinery, and when deciding how to do farming operations. Will farmers continue to have a fuel arrangement with their contractor which
provides the contractor with the fuel he needs? That's a common arrangement in many parts of the country, but not one which encourages frugality.

In a recent conversation with a dairy farmer I was told that the Claas self propelled harvester last year used £10 of diesel per care cut, and the hauling tractors, mower and buck rake used a further £10 - this was measured only because they filled at the local depot and not from the unmetered farm tank. As the farmer asked "Were their tanks brim full when they arrived? Did they drive economically or as they felt like?" The net result is that the £37/acre contracting charge is actually closer to £57. he is seriously considering buying a forage wagon and doing the job himself, with the help of another driver. 

Every day on my way to this office I pass a newish Massey 80HP 4445 with a yard scraper on the back, and it looks like his round trip is about 6 miles, maybe more. I think of the yard scraper mounted on an old dumper,  a report which costs all of 99p, which would provide the farmer with an implement he could leave in the yard with no danger of it being stolen. 

When it comes to farm transport, how much extra road fuel is used by driving high capacity Land Rovers and pick ups to collect a few spares from town, instead of using a smaller car, van or even 4x4 like a Suzuki? 

ON PROPERTY the effect of increasing the Stamp Duty to 7% on property of £2million or more is a major unexpected change which is still being digested and worked on by agents and accountants. Even though it seems likely that genuine farmhouses will escape the Land Tax, there is sure to be a grey area in exaclty the same way as there is over Agricultural Property Relief. There's little doubt that the Duty will dampen the market for farmland, which, it must be said, has been in super-heated mode for the past few years. It might have a beneficial effect on tenant farmers, in causing some more land to be put up for rent rather than sold, but there's a very big 'might' in this. It might divert attention to other tax efficient investments for the very wealthy, providing real farmers with a greater chance of securing the essential factor of production required by any farmer. 

The Scottish NFU had a pre-budget request to the Chancellor to provide some tax incentives to landowners to let out their land to tenants instead of farming larger and larger acreages themselves. The request was ignored, but had considerable merit, particularly if the rentals were made to new entrants. The industry is in need of new blood, and a real chance and opportunity for young people. 

ON COMMUNICATIONS  There seems to be less interest in expanding the high speed broadband coverage across rural areas, and so farmers are going to be waiting for a longer time to get the kind of connection speeds needed by business today. There is, however, mention of improving mobile phone reception and coverage across the country. Are we now thinking that it is less costly and more efficient to provide mobile coverage so farmers and rural dwellers can use a dongle instead of a high speed wore connection?  
This could be the thinking, and, from my experience of using a dongle in rural Turkey last summer, I can only say the performance is impressive, and certainly equal to the speeds achieved in the office here in West Wales. Dongles need good mobile reception, but this is provided by a series of masts, not miles of expensive cabling, all vulnerable to being damaged. 

EMPLOYMENT Enterprise loans for young people will help youngsters start up businesses, and there is a window of opportunity for some growth in rural employment. But the detail is important. Will it end up with funding largely going to the most affluent youngsters - the sons of wealthy farmers for example - or to those who are genuinely unable to raise funds? Allocation of funds is so often in the hands of people 'of means'. 

THE NFU response included some regrets there was no revision of the decision to reduce the Annual Investment Allowance to just £25k, which the Union sees as discouragement for farmers to invest in new equipment, and they also are concerned that no favourable tax treatment is being given to farm reservoirs which would help the industry in a time of water shortages. To claim the allowance as it stands today at £100k requires the farmer to both pay for the machine (on HP or loans, but not on lease) have it delivered and and working, by the end of the tax year. 

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