FARMING WITHOUT SUBSIDIES
by Duncan Pickard
Almost all discussions on the impact of Brexit on farming have emphasised the importance of subsidy income support. A typical example was from the chief strategy officer of AHDB who recently said that subsidy income accounted for 80% of farm income in Scotland. This estimate must have been based on the officially produced, average Net Farm Income (NFI) which is not the same as the real average income of farmers. Those who use average NFI should find out how it is calculated. When I questioned the civil servant responsible for the publication of NFI for Scotland he said that it should be viewed as an economic measure rather than a wage and, as such, could be used to observe trends over years and between countries. When I calculate the NFI for our farm it is considerably lower than our taxable profit. We do not depend on subsidy income support. Many more farmers in Scotland are in the same position as indicated by the substantial number who did not take up the offer of an interest- free loan from the government at the end of last year because of the late payment of subsidies.
When dealing with Brexit and producing a forward strategy for farming, policy makers should not use artificial economic measures of farm incomes instead of real incomes. Many of those who are dependent on subsidies do so because they have chosen to. Why work seven days a week when you can live comfortably on subsidy income and only work four or five? Some others need their subsidy income to pay for additional land bought at excessively high prices. Subsidies have allowed some farmers to become inefficient and others to try to achieve economies of scale which do not exist. Subsidies should be seen for what they mostly are: non-means tested income support for wealthy land owners. The latest figures from RPID show that, of the total money disbursed, 69% went to 20% of those who submitted claims. Subsidies are responsible for some of the rises in land prices which have made it almost impossible for young people to make a start in farming. The report from RBS Harvesting the Future for Young Farmers identified high land prices as the main barrier to entry, but it did not attempt to explain why land prices are so high. The perverse policy of favouring land ownership with tax breaks and penalising work and trade with high rates of tax is also a major factor.
When comparisons are made with New Zealand’s farmers, many reasons for their success are given but the most relevant is that they have lower costs of production and that is where farmers should be looking instead of seeking ever increasing prices to cover our high costs. We will have to adapt to reduced subsidies after Brexit but so will farmers in the rest of Europe; the present level of CAP spending is not affordable. Brexit will give us the chance to get rid of a lot of costly red tape and radically reform our outdated, complicated and disincentive tax system. Earned incomes should be relieved from taxes and the necessary revenue collected instead from the unearned increases in the value of land, both urban and rural. Reduction of Income Taxes and the abolition of VAT, the EU’s favoured tax, would do more to promote employment and trade so that consumers could afford to buy what we produce, than any supposed benefits from remaining within the clutches of the EU and its stifling regulations and undemocratic directives.
The fundamentals of farming have not changed much over the years:- make sure the land you farm is not too dear, whether bought or rented; do not have all your eggs in one basket and do not pay others to do what you could and should do yourself. Please note- farming is a voluntary occupation.
Farm facts:- 650 acres in Fife, bought on moving from Yorkshire in 1992. We have a suckler herd , a ewe flock and grow wheat, barley, oats, carrots and swedes.