The new Chair writes his first review.
Writing the first of my quarterly reviews, I cannot even contemplate starting without thanking Aloysia for all that she has done in steering the group through the last few years. Loysi’s first piece in this newsletter acknowledged that she was “taking over the chair of this community at the time of what is potentially the greatest change in agriculture for a generation, on the brink of what Michael Gove has christened “the fourth agricultural revolution” will be a challenge. By the time we go to press, the country could be heading for a hard Brexit, soft Brexit, no Brexit, second referendum, general election or any combination of these”. She was not wrong!
However, she could not possibly have foreseen what revolutionary changes would take place over the following three years. In addition to the political issues which she outlined, which have triggered the most fundamental reset in the relationship between government and the country’s farmers since the second world war, we have seen the impact of a worldwide pandemic. Although the direct effect on this on the industry was somewhat muted, certainly by comparison with other sectors of the economy, the indirect effects have been profound and will be long lasting. For us as accountants, our work patterns have been completely restructured and will probably never be the same again. Among the many unexpected consequences, most of us have been through a rapid and effectively compulsory course of IT training such that online shopping and virtual meetings, once the preserve of the true geek, are now so mainstream as to no longer merit comment.
Due to a series of delays and postponements, Loysi did at least escape the widespread introduction of Making Tax Digital. That delight will now take place during my tenure along with the associated transition period, possible change in fiscal year and whatever joys await us from a chancellor facing the servicing of a multi-billion bail-out package. At this stage I am just grateful that the Autumn Statement seems to be “mostly harmless”.
On the positive side, despite everything, we have managed to produce a full programme for our members. Our webinars have been well attended and, if feedback is to be believed, informative and even entertaining. Despite (or probably because of) going online, the last two conferences have attracted more delegates than usual. In 2020 we were privileged to have George Eustice as our keynote speaker, and this year we featured a range of farmer speakers, including a family livestock farm from the Scottish borders, a dairy farm and large-scale cheese maker from the southwest and the finance director of Dyson Farms and Velcourt’s Managing Director – probably two of the largest farming businesses in the country. Coupled with updates on farm economics from Andersons, industry updates from the CAVV and Birketts solicitors, an IT slot from Figured and a tax investigation session from Kevin Igoe, there should have been something for everyone.
Finally, we had weather – the one variable which has afflicted farmers since the first hunter gatherers decided to plant their cereal crops near their dwellings. Figures just released by DEFRA underlined the full impact of the awful 2019/20 planting season when almost a quarter of the national wheat crop remained unplanted and production switched to less profitable spring barley. This, combined with generally lower yields, saw total wheat and barley production drop from 25m tonnes in 2019 to about 18m tonnes in 2020 and recover to about 21m tonnes in 2021. A generally positive price trend helped take some of the sting out of the lost production, but much of that will now be absorbed by significant input inflation.
So, after three years of mayhem, what does the future hold? We know that there are still enormous amounts of detail outstanding regarding subsidy reform, not least of which is the tax treatment, about which the treasury is remaining ominously silent. We also await potential wider changes to the tax system, reflecting the rising pressures from an ageing population and the sunk costs of the pandemic which, like the costs of financing a war, will probably be carried at least partially by the next generation.
Underlying all this is the pressure on the available land, where the needs of food production and greening are likely to meet head on at some stage, creating financial and mental pressures on our farming clients, none of whom are getting any younger. There are also the issues of a wider population who want better quality food for the same or less money, activists of various sorts who believe their own views on rural matters are the only ones which merit a hearing, and international issues – such as whether the world can actually produce enough food to meet its growing numbers and what will happen if this proves impossible. I sometimes wonder whether the current population flows from North Africa to Europe are in some ways indicative of this.
However, in the immediate term we need to look at those things which we can influence – whatever happens in the wider world, clients will need advice on tax compliance, succession planning, structural change to cope with the new subsidy regime and longer-term tax planning to manage new demands on their businesses. Farming is a highly specialised business and farmers need accountants who understand the intricacies of that business to advise them. Let’s remember that lovely quote from the conference, “a farmer might be doing everything right, but are they doing the right thing?” I hope that over the next few years I can do a little bit to help this happen.*The views expressed are the author’s and not ICAEW’s.