Suffolk Chamber patron RSM: Emerging from Uncertainty, what support is there for Suffolk agricultural businesses?
The last seven weeks have been difficult for most people. Everyone has been affected by the awful COVID-19 pandemic. For some, lockdown has meant furloughing, and the mental strain of missing family, friends, and normal day to day life. For others, lockdown has piled pressure on working hours and the strain of looking after the mental and physical wellbeing of others – our brave NHS workers leading this charge with distinction.
After the Government announced a “conditional plan” to re-open society, many businesses are preparing to get back to work and are awaiting detailed advice on what will need to change in the workplace, including clarity on the use of personal protective equipment. Even before the announcement, I heard many stories of businesses, in the construction sector in particular, planning for a return to work. This should be more manageable in the East of England, where reliance on public transport is less prevalent than in our major cities.
Whilst the Prime Minister’s update didn’t satisfy everyone, my friends are delighted by the prospect of a game of golf. They are less excited by only being able to play with members of their household, which for many will mean on their own. I do not envy the golf club’s management, who must now implement a social distancing policy which ensures access to the course can be controlled, monitored, and made available fairly to the membership. This is just one example of how practically challenging a return to normality will be.
Once we and this country’s businesses conclude the long-term process of a full return to work, we will reflect on what COVID-19 has taught us. We may hold a new found value for money, people, and the simple everyday pleasures. We may, as individuals, be less concerned about the materialistic, and more inclined to be giving towards others. Businesses will implement new working practices, developed during lockdown. Some will prosper, with their new found perspective and lessons learned, and some will not.
Our Government should be no different. Whether one agrees with their political leanings, or their approach to tackling COVID-19, one cannot deny the hard work put in by our country’s leadership during the pandemic. The success of decisions made at this time of crisis will be pawed over for months to come, and blame for failings will no doubt be allocated, but more important has to be what we have learned, and how we do better in the future.
We have learned that we are a resilient nation, who, with our backs against the wall, have come together to support one another, and our key services. ‘The Big Night In’ and Captain Tom raised in the region of £60m. The Government’s call for volunteers, at the start of the pandemic, yielded more than treble those required. People have, in the main, lived by the Government’s message ‘Stay at Home, Protect the NHS, Save Lives’.
We now know we can adapt to a crisis. Adapting to working from home, communicating electronically, amusing ourselves and finding alternatives to our usual pastimes, and shopping and eating more locally, and responsibly. The big supermarkets have taken steps to protect their businesses and their customers, however anyone that has undertaken their weekly shop during this time will confirm it is not a pleasant experience.
The alternatives to supermarket shopping have always existed, however they have come into their own during the pandemic. Meal delivery services such as Hello Fresh and Gusto have filled the gaps left by the big supermarkets’ bottlenecked delivery services. Farm shops and local producers have experienced success as our demand for fresh and local produce has shifted. Consumers have been willing to pay more, and have been forced to be less wasteful. However long this goes on for, we must hope that consumer behaviour is permanently altered for the better.
Consumer behaviour is one key ingredient for the future success of our domestic industry, one other being Government policy. On 11 March the Chancellor announced the budget, hastily amended and informally titled the ‘Coronavirus budget’. He announced a £30bn package to boost the economy and get the country through Coronavirus. It’s impossible to quantify the current and future cost of COVID-19 to the UK, but one must speculate that £30bn is just the tip of the iceberg.
Prior to COVID-19, the March budget was expected to include changes to Inheritance Tax reliefs. Longstanding reliefs such as Business Property Relief and Agricultural Property Relief were rumoured to be at risk, and detailed changes, such as those suggested by the Office of Tax Simplification’s 2019 report, were being given serious consideration.
Changes to these reliefs would have a significant impact on this country’s farming sector. Many land owners rely on Inheritance Tax Reliefs and Capital Gains Tax reliefs to pass assets on to future generations and secure the future of their businesses. Simply put, having to pay Inheritance Tax on passing a farm down a generation could mean having to sell the farm, thus damaging the farming business.
Farmers are already dealing with the loss of Direct Payments (in the form of the Basic Payment Scheme, BPS) under the new agriculture bill. These payments are being phased out between 2021 and 2027, with the largest claimants losing more of their income earlier. The Government has announced the Environmental Land Management Scheme (ELMS) albeit this is not expected to directly replace BPS.
Before COVID-19, the UK farming sector was faced with a Government that believed we could rely more and more heavily on imported food, in a consumer market that wanted more choice, more convenience, and less cost. Farmers faced the prospect of lower income from Direct Payments, and changes to the capital tax regime making it harder to preserve the long term value of their assets.
COVID-19 presents the UK Government with the opportunity to reconsider its view on domestic food production. What the pandemic has shown us is that, at a time of global crisis, our domestic food production industry will step up. George Eustice ended the Government’s VE Day Coronavirus update with a thank you to those working in our food industry, and one hopes this is an early sign of the recognition of the need for a sustainable domestic food production industry.
To enable this, farmers need to be able to make a decent living from farming, in line with other industries. Many family farming businesses turn a profit because their key asset, the land, is provided to them by the owners for no charge, they do not rely on bank borrowing and their key workforce, the farming family, draw modest amounts from the business. For years farmers have been told that in order to survive, they must diversify. Many have done so, investing in commercial property, farm shops, visitor attractions, wedding venues. Is it right that, in order to earn a living, farmers must turn their hands to something different. Shouldn’t they be able to earn a living from doing what they are good at?
The Government must set the tone for this change in UK agriculture. Either the Government must support UK farmers in the form of direct aid, or they must force food retailers to pay a price to core producers that allows them to make a living (or somewhere in-between).
It is widely felt that direct support for the sector would be best aimed at improving efficiencies, making better use of technology and improving contributions to the environment. Whatever future support looks like, I sympathise with the Government in having to make this decision. Ultimately they have to choose between funding UK agriculture, or passing the cost of this on to consumers. Only time will tell as to whether consumers would accept this. It has been easy to accept higher prices and more localised shopping at this time of crisis, but how long after lockdown will we revert to our previous behaviours.
Jack Deal, Associate Director, RSM
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