Thoughts on the APR controversy

I have been having a bit of a debate on social media with a dairy farmer and former Nuffield scholar.  He says, with justification, that farming is hard physical work, dangerous and offers returns of 0.5 to 1 per cent.

My response was in that case why not sell up, reinvest the capital and have an easier life?   The standard response is that it's 'a way of life'.   I am familiar with this response as my nephew is a seventh or eighth generation farmer.

Of course, it is way of life that people are entitled to choose, but don't complain too much about the hardships.   To me, it doesn't seem an enviable way of life, but opinions clearly differ.

Why are returns from farming so low?   The removal of CAP subsidies after Brexit hasn't helped and it is possible that some farmers are having buyers' regret..  I remember touring the North of England explaining some of the risks to farming audiences during the referendum campaign.

There has been a shift of power down the food chain from farmers to supermarkets that seek the lowest possible prices for their customers.  Farmers' margins have been squeezed.   Supermarkets impose demanding contracts and there have been allegations of malpractice.

However, another factor has been people buying up farmland as a hedge against IHT.  They are not necessarily buying whole estates as in the case of farmers' hero Jeremy Clarkson, but often smaller bundles of land that can be rented out to farms seeking to expand.

According to an AI  overview, 'A variety of buyers purchase farms, including private investors, institutional investors, and lifestyle buyers. In 2023, non-farmers bought more than half of farms and estates sold in England, with private investors accounting for 28% of transactions.'

Will APR's reduction (remember we did not have this relief before the 1970s and 1980s) push down land prices and make it easier for innovators to enter the industry other than by succession?

The honest answer is that I am uncertain.   An interesting article in Farmers Weekly recently argued that land prices revert in the long run to a ratio used at the time of the dissolution of the monasteries by Henry VIII.  But in the long run, as Keynes said, we are all dead.   There have been some big fluctuations in between, e.g., after the passage of the Corn Laws which lay the foundations of a cheap food policy.

As for the APR proposal itself, no new Government is going to U turn on a central element in its budget, even if the revenues to be derived are not great.

However, given the conflict over the likely effects (partly arising because different things are being measured), it is worth having an independent review of the evidence to ensure that the threshold does not affect too many smaller working farms.

Given anecdotal evidence on the number of very old farmers who have not gifted their farms, there might be a case for relaxing the seven year rule for those over a certain age.  Mind you, I would quite like for my children for liable for just 20 per cent over 10 years on my relatively modest estate!