In this month’s instalment of The Inside Track, I want to share my reflections on the IHT issue in agriculture and why, for me, it is about the reputational management of the whole of the agricultural sector.
I think the principle of what the government is suggesting, which is, in simple terms, that agriculture pays its way in the same way as other businesses, is absolutely right. If you asked most farmers, I think they would agree. They want to be seen to be paying their way, and they want agriculture to be seen as a business that is able to do that.
I have heard a great deal of discussion around the view that farming cannot afford to do this because land prices are so high, and many farmers struggle to make a sustainable income. Yes, land prices are high – in part due to APR and its appeal to non-farmers/industrialists – but returns on total capital are so low due to farmers being ‘price takers’, as they have been for many decades… particularly since agricultural marketing organisations were disbanded in the 1980s/90s. For me, this highlights the fact that agriculture does not extract adequate income from the food system. So, either as a society, we are not paying enough for our food or too much of the income remains further up the supply chain, or indeed both.
Not every business deserves to thrive, but every business should have the opportunity for success and farming should be no different. As in any other business there is no guaranteed path to profitability, but farming should operate in an environment that provides the opportunity to be profitable and deliver a return on investment. This in turn will allow for succession planning as in any other business.
Towards a middle ground?
I don’t think the solution to the current issues is to retain the status quo.
In 10 years’ time, I suspect we may reflect and recognise this change as a beneficial turning point. Maybe we will see that it helped to challenge the food supply system to become fit for purpose across the whole of its operation whilst stimulating a more businesslike approach to farm ownership and succession. At present, however, it feels like the policy was developed in a vacuum and the government failed to reach out to the people it would impact upon, to understand the nuances and the finer details. I absolutely think that the government will move on this, and we will arrive at a middle ground that addresses some of the issues that Tom Bradshaw at the NFU has very eloquently articulated. The stated goals as outlined by the Secretary of State in his recent Oxford speech certainly point towards positive change for farming’s future, but inevitably both issues need to be addressed, one alone will not suffice.
Enabling the transition to sustainable food production
The £5bn the government has allocated to agriculture over the next two years is not insubstantial. The issue is that much of that funding is focused on helping businesses become more environmentally sustainable. However, if we reach a stage where income from environmental stewardship is greater than income from food production, then we are stuck. Particularly if farmers commit to multi-year grant schemes which take fields out of production for the duration. Policy needs to enable the farming industry to make the profitable transition into sustainable land management, delivering safe nourishing food, a biodiverse landscape alongside clean air and water. As ever the devil is in the detail. In many ways, that is what we are facing with the IHT change; most people probably think in the cold light of day that the principle is right, but the devil remains in the detail. I believe all parties, farmers, and government, want the same outcome, it is the transition that requires tenacity, attention to detail and evidence to underpin policy change.
Just as an aside, I suspect the Labour government would be more receptive to proposals to enhance farming productivity and returns than pressure to simply revert to 100% IHT relief?
The need for balance
I hope that as we go into this spring, the crucial issues and details are ironed out. In years to come, I think we will look back and see how it helped us plan our businesses better, brought business professionalism and created an industry on an equal footing with the wider economy creating wealth, jobs, and innovation. We should be proud of what we do in the farming industry and passionate about making sure that it has a future.