IN RESPONSE to a UK Government white paper on internal markets, the Farmers’ Union of Wales has stressed the importance of protecting Welsh farmers against unfair competition from other parts of the UK and countries across the globe, and that Welsh devolution must be respected.
In his introduction to the UK Internal Market White Paper, Alok Sharma MP, Secretary of State for Business, Energy and Industrial Strategy, highlights how increasing differences between rules and standards applied by different Governments in the UK’s four nations after Brexit could cause market distortion, discrimination and unfair competition for businesses in a way not seen for hundreds of years.
The White Paper, therefore, proposes measures to prevent such impacts based on the principles of ‘non-discrimination’ and ‘mutual recognition’
FUW Head of Policy, Dr Nick Fenwick said: “We are glad the UK Government has woken up to the need to take this issue seriously as it has previously been kicked into the long grass because it is so politically contentious.”
Dr Fenwick said that the FUW had been highlighting the need to address this issue since the EU Referendum in 2016, and in July 2018 the FUW had published a detailed paper considering the matter entitled ‘Filling the Void – Steps towards a post-Brexit UK policy framework’.
“While we welcome the UK Government’s recognition of this issue, we are extremely concerned at the suggestion that rules could simply be dictated by London, rather than there being a means by which to reach agreement between UK Governments.”
Dr Fenwick said such a move could undermine devolution and work to the disadvantage of Welsh farmers.
“The consideration of such matters in a White Paper within months of the end of the Withdrawal Agreement period gives us very little time to hold proper detailed discussions and introduce the type of structures and bodies we truly need to make recommendations, enforce regulations, arbitrate on matters etc. in a way that is fair.”
“It also gives us very little time to sort out what are huge constitutional issues which also happen to be crucial to the running of Welsh businesses,” he added.
In response to the White Paper, the Union further stressed that while the UK Government is right to recognise the dangers of direct and indirect discrimination, unfair competition, market distortion and other issues that could arise within the GB/UK internal market, it should also recognise that the same issue exists across international borders.
“Given the current trade negotiations with the EU and USA, for example, the UK Government should also recognise the likelihood of such adverse impacts occurring as a result of inappropriate or ill-considered trade deals which expose us to different standards or unfair competition,” said Dr Fenwick.
“This is a particular concern with regard to agricultural produce produced to environmental, health and welfare, social and other standards that do not meet those required of UK producers, and subsidy and support regimes that differ significantly to those introduced in future in the UK’s four nations.”
At present, while significant differences between the UK and the EU is allowed under Single Market, Common Agricultural Policy and related rules, these are within strict boundaries aimed at minimising market distortion and unfair competition while recognising regional and national needs.
If a trade deal with the EU is reached, there is potential for market distortion and unfair competition for UK producers as a result of the fact that the EU will continue to pay farmers direct support, but Wales and England want to move over to environmental ‘public goods’ style payments – with many lobbying for farm payments to be cut altogether.
“The EU’s reaffirmed commitment to maintaining direct support for active farmers through CAP payments, coupled with a move in Wales and other parts of the UK to get rid of direct farm support in favour of environmental payments, would clearly introduce the kind of unfair competition the UK Government refers to in this paper.
“This danger is no different in principle to the dangers recognised in the Internal Markets White Paper, so also should be recognised by our Governments – not only in the context of unfair competition from the EU, our most important trading partner in terms of food, but also countries like the USA if we are to strike a deal with them.
“We need a trade deal with the EU to avoid massive damage to farms and other businesses, but we also need our governments to recognise the self inflicted damage that could be done by radically changing our own farm support systems while our main competitors twenty or thirty miles away over the sea continue with direct farm support,” he added.
A vision for Welsh upland farming
The NFU Cymru Vision for Welsh Upland Farming report, which was underpinned by a survey of over 750 farmers, was launched at the Vision for Welsh Upland Farming virtual conference on Tuesday, November 24.
The document reveals that 96% of farmers surveyed believed their role as food producers was very important or fairly important, with 95% saying that food production and sales were very important or fairly important to the viability of their business.
The biggest worry for Welsh upland farmers to surface from the research was farm business profitability, with 85% of those questioned stating this was a ‘significant threat’ to the sector. The vast majority of those questioned (92%) said it was vital that future Welsh farming policy included measures that ensured farmers could make a reasonable living.
With the Brexit transition period coming to an end, 84% of farmers surveyed said that future trade deals were a significant threat to upland farming, while 80% stated that future policy was a significant threat.
NFU Cymru said the findings of this research work provide ‘another compelling argument’ as to why future Welsh agricultural policy should include a stability measure to help ensure the safe supply of food and as an economic foundation in rural communities, alongside the other multiple benefits provided by Welsh farming, amid changing trade and climate conditions.
The new NFU Cymru study also shined a light on Welsh upland farmers’ attitudes towards the environment.
The survey data further emphasises farmers’ role as drivers of the rural economy. 30% of farmers surveyed said their business supports or buys from 21 to 50 different businesses, with a further 10% stating that their business trades with or buys from more than 51 other businesses.
The important contribution of Welsh upland farming to rural communities and Welsh culture was also revealed.
Diversification remains an important income stream for many Welsh farms; 43% of farmers responding to the survey stated that they had a non-farming element to their business. The most popular diversification enterprises were renewable energy (43%) and accommodation (42%).
Discussing the importance of NFU Cymru Vision for Welsh Upland Farming project, NFU Cymru LFA Board Chair Kath Whitrow said: “In recent years, despite their extent and significance, we have seen upland farming policy de-emphasised. As our relationship with the EU changes, the economic rationale for upland livestock production is threatened. Global environmental challenges, such as climate change and biodiversity decline, are viewed by some as drivers for land-use change without any consideration of the wider impacts.
“At this pivotal time for Welsh farming as we transition out of the CAP and into a new ‘made in Wales’ agricultural policy, the NFU Cymru LFA Board wants to ensure that the voice of Welsh upland farming is clearly heard in this debate. This is a message that has resonated strongly with Welsh upland farmers and, despite the limitations placed on us as a result of Covid-19, the voice of farmers across Wales has been clearly heard with our survey attracting a fantastic number of responses.”
NFU Cymru President John Davies said: “The Vision for Welsh Upland Farming report launched at today’s conference is one of the most comprehensive pieces of research work undertaken by NFU Cymru. Its findings are of strategic importance not just to the people living and working in the Welsh uplands, but to the whole of Wales.
“This research provides another compelling argument that future Welsh agricultural policy should include a stability measure to support farmers by protecting them against the increased volatility that affects businesses, trade and production. Such backing would ensure our farmers can continue providing safe, affordable food, as well as boosting the economy, enhancing the environment, caring for our cherished landscapes communities and being champions of Welsh language, culture and rural communities.
“I urge our policymakers in Cardiff Bay to carefully consider the report’s key recommendations and work with us to ensure that the people and communities of the Welsh uplands can continue to deliver for the whole of Wales.”
Potato production up despite tough year
THE TOTAL harvest of British potatoes this year will be 5.3m tonnes according to provisional estimates – up two point eight per cent (2.8%) on last year’s figure but just below the five-year average of 5.4m tonnes.
This estimate by the Agriculture and Horticulture Development Board (AHDB) has been released during a time when growers have battled an exceptionally wet harvest period for the second year running.
They have fared better than last year, as on 10 November it was estimated that two per cent of the planted area was yet to be lifted. This compares with 11 per cent of the crop that was estimated to be unlifted on 12 November 2019.
This production figure follows an AHDB estimate that the planted area this year is the third-lowest on record.
Alice Bailey, Senior Analyst at AHDB said: “This overall net yield sits in line with the five-year national average (2015-2019). Anecdotal reports suggest that yields have been somewhat variable from farm to farm, even field to field. Yet overall, crops are within farm expectations so it is not surprising that the national yield is in line with recent years.
“We saw planted area drop by two-point three per cent this year, yet we are estimating a two-point eight per cent rise in production. This is based on both a slight increase in yields year-on-year and the fact that a large area was left unharvested last year. The unlifted area in 2019 was estimated at six per cent, whereas in 2018 less than one per cent was estimated to be left in the ground and we would anticipate similar this year.”
It was also noted that the estimate could be amended in the coming weeks, with 2.1Kha still to harvest in the East of England, and some members of the 450 strong AHDB Grower Panel still to return their survey information.
WINTER MARKETING CAMPAIGN
Meanwhile, Potatoes Strategy Director Rob Clayton announced that AHDB would be launching another promotional campaign in reaction to the market conditions caused by the coronavirus. This follows on from a similar campaign in the summer that reached 5 million shoppers via catch-up TV, social media and display advertising.
“Since the pandemic hit we have increased the amount of data we analyse from supermarkets and other areas of the marketplace. While potato sales at retail are up eight to nine per cent overall – analysis from Kantar Worldpannel shows baking potatoes lagging behind at a rise of three per cent.
“Jacket potatoes are a fantastic healthy and cost-effective option for families, so we will be launching a winter campaign to inspire shoppers to take advantage of all the great things they can do with bakers,” said Doctor Clayton.
Farmers should prepare for IHT changes
There are less than six months before the Spring Statement, and changes to the IHT format – based on recommendations originally outlined by the Office of Tax Simplification (OTS) in July 2019 – are likely. “The recommendations were primarily geared towards streamlining IHT administration but may have the secondary effect of reducing some of the favourable reliefs available to farmers,” explains Catherine Vickery, associate director at Old Mill.
“Current IHT legislation can be very beneficial for farmers, giving confidence that they can pass down agricultural business and property assets to the next generation tax free on death,” she adds. “Unfortunately, the coronavirus pandemic has left the Government with a very large debt, so there’s potential that it will implement any OTS recommendations to increase tax revenue.”
So, with the Spring Statement anticipated for March, what can farmers do to mitigate any potential changes?
“Under the existing rules, agricultural land and property qualify for Agricultural Property Relief (APR) from IHT at up to 100%,” explains Mrs Vickery. Other land and property assets, like diversified enterprises, can qualify for up to 100% Business Property Relief (BPR) as part of an overall farming business which is at least 50% trading. “These reliefs can apply on lifetime transfers as well as on death where the conditions are met.”
Transfers on death currently also qualify for Capital Gains Tax (CGT) free uplift so that gains are effectively washed out. Lifetime transfers of agricultural land, property, and businesses which are at least 80% trading qualify for gift holdover relief, meaning gains can be deferred until a later disposal.
However, a key OTS recommendation is to remove the CGT free uplift on death when IHT relief is also available. This would mean that the next generation would inherit the farm at an historically low base cost, leading to higher CGT on any future sale.
“The most tax efficient option has often been for farmers to continue to actively farm and hold onto assets until they die,” says Mrs Vickery. “Now, given speculation about potential changes, the best course of action is to get a succession plan in place as soon as possible and start implementing it.
“Plans need to be arranged based on what is right for you, your family and the farm right now, rather than how things might stand at a later date.”
This means establishing who is taking on the assets and if they have the skills needed to drive the business forward. “Pass over this responsibility while you still can and while you can be on hand to guide and support your successor,” advises Mrs Vickery.
It’s also important to review partnership or shareholder agreements, and consider the handing on of other assets. Additionally, farmers should collate any trust and gift deeds, so that paperwork is on hand to be reviewed.
“Though we suspect the new IHT rules won’t be favourable, farmers need to make use of the rules we have now as these are a current certainty,” says Mrs Vickery. “Succession planning is so easy to put off but it’s a vital tool in safeguarding the future of farming businesses.”
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