Chancellor targets farmers' fuel tax break

Hints are increasingly being dropped that the Chancellor might target the 'red diesel' tax break available to farmers. Ending the overall freeze on fuel duty could be politically difficult, but the £2.4bn revenue foregone on construction and farming vehicles could be an attractive target.

Red diesel (so called because it is coloured red in an effort to avoid fraudulent use) has a duty of 11.1p a litre against 57.7p for standard diesel used by motorists. It is only supposed to be used on the farm itself for machinery such as tractors and combine harvesters. It is not supposed to be used on the highway. It is used by airport vehicles and most freight trains run on it.

It was originally thought that just the construction industry and perhaps airports would take a hit, but that might be difficult to enforce in practice. I would have thought it more likely that the reduced duty will be phased out rather than eliminated overnight. However, it will be another blow to farmers reeling from the phasing out of direct payment subsidies.

The Government launched a consultation on the subject last year which details its long history and the issues that have arisen: Red diesel

Farming not important says Treasury adviser

Treasury adviser Tim Leunig has said that Britain could do without its fishermen and farmers: Farming and fisheries are not important

Whilst he was expressing a personal view, this will reinforce a fear already held by farmers that the Government will give a low priority to their welfare in trade talks.

The NFU does tend to overplay food security arguments, given that there is a variety of suppliers, but a country with plenty of agricultural land would look odd if it did not grow some of its own food.

Is it useless Eustice?

Despite his farming background new Defra secretary George Eustice got a rough ride at the NFU conference last week when he was booed by angry farmers. Farmers Weekly commented that 'Reassuringly, Mr Eustice already owns a pair of wellies, and knows his way around a farm.' In fact his practical farming involvement was some time ago and I own some wellies and make farm visits quite often, but that doesn't qualify me to be a Defra minister.

As Farmers Weekly admitted, the Defra secretary has tasks other than being a MAFF style spokesperson for farming. (Anyone interested in the history of MAFF and Defra's relations with farmers can have a copy of an unpublished paper I wrote on the topic). FW noted, 'Questions have also been raised over whether he is the big hitter farming needs … Whether Mr Eustice can hold his own against Cabinet heavyweights remains to be seen.' More generally they said, 'Too often in the past the Department has been a dumping ground for ministers of mediocre ability.'

Farmers were particularly annoyed that Mr Eustice was not prepared to relax the notorious 'three crop rule' other than through individual applications claiming force majeure.NFU president Minette Batters said farmers were hugely frustrated. 'We have left the EU, half the country is under water and [yet] we are still going to abide by the three-crop rule and process thousands of force majeure applications. It just seems absolutely extraordinary.'

However, we are still in the transition period and Mr Eustice has no powers to set aside what he rightly described as a 'barking' rule despite shouts of 'rubbish' at the conference. To me it is a classic example of the CAP's ability to come up with poorly designed policy instruments: the relationship with the intended outcome (improving biodiversity) was poor and the transaction costs high. The rule requires farmers with more than 30 hectares of arable land to grow at least three different crops.

Perhaps more importantly, he declined to commit the Government to upholding existing UK food standards in future trade deals with countries, such as the US, that have weaker regulations. 'I can't provide any such assurances,' he said.

A House of Lords amendment to the agriculture bill would bar the Government from signing trade deals that do not require imported foods to meet UK standards on food safety, animal welfare and the environment.

Farmers launch climate change initiative

The Yorkshire Agricultural Society, where I served on its innovative Farmer-Scientist Network for many years, has launched a #Farm4Zero campaign on climate change. This is a very welcome initiative.

The YAS states, 'The campaign aims to energise farmers and rural businesses about how they can respond to the climate change challenge as British agriculture seeks to reduce its carbon footprint. Although agriculture accounts for just 9% of the UK’s greenhouse gas emissions, compared to proportionally higher impact sectors such as transport (23%) and industry (21%), farmers are acutely aware of the need to take action.' [Well, at least some are].

The Yorkshire Agricultural Society is determined to focus minds on the positive opportunities that exist as British farming seeks to meet its own target to become net zero in greenhouse gas emissions by 2040 – ten years ahead of the Government’s 2050 target for the British economy as a whole.

No one denies that it's going to be a big challenge, but an important one. Far better that farmers take their own initiatives, rather than waiting for legislation.

Defra sets out its stall

Defra has provided more details on how direct payments will be phased out in England and how the future Environmental Land Management Scheme will function, although arrangements after 2021 remain unclear: Plans for future greener farming

ELMS will have a three tier entry scheme. As far as the basic payment is concerned, farmers making a claim of more than £150,000 will be subject to a 25 per cent reduction in 2021, while those making a claim of up to £30,000 will be subject to just a five per cent reduction.

I welcome proposals on productivity and research and development. From 2021, new government grants will help farmers to invest in equipment and technology which will help them to increase their productivity and deliver environmental benefits. From 2022, Defra will support research and development projects to help our farming industry benefit from innovation, enabling farmers to produce food more efficiently and sustainably with lower emissions.

As far as smaller investments are concerned, 'Grants will be available for equipment, technology, and small infrastructure investments that will make an immediate difference to farm performance, including investments that help farmers use less inputs, reduce emissions, and cut waste, which will also benefit the environment.' These will be for specific, pre-determined items - in other words the devil is in the detail.

As far as larger investments (sum not specified) are concerned, 'These grants will be for higher-value or more complex investments, with the potential to bring transformational improvements to business performance. Eligible investments could allow for more efficient use of labour, provide opportunities to switch to alternative or more efficient production methods, reduce environmental impact or create opportunities for new business models and alternative ways of selling produce directly to customers.' These will be for priority outcomes, including the use of automation and robotics.

The end of farming?

This 'long read' in The Guardian takes the kind of line one would expect, i.e., it is critical of 'intensive' farming and sympathetic towards attempts at rewilding and environmental regeneration: The end of farming?

In my view farmers tend to rely too much on food security arguments as a response. I think there is a need to engage more with these environmental concerns, even if some of them are overstated. Farmers may feel that an urban audience does not understand their challenges, but the UK is a highly urbanised country.

It doesn't help that some farmers still appear to be in denial about climate change according to a recent report in Farmers Weekly. An survey carried out for them by Macleod Research found that more than two-thirds of the farmers interviewed believe the increase in extreme weather events seen over the past five years is due to climate change – but many believe it isn’t.

Some 31 per cent said they believed weather patterns were cyclical and had always changed over the years Many said weather patterns were natural and had little or nothing to do with mankind or the impact of human activity. Of those who believe extreme weather is due to climate change, 68 per cent said it was a threat to their business but 32 per cent of respondents said they believed it was an opportunity to do things different, including growing different crops and starting new enterprises.

NFU president Minnette Batters has recently claimed that farmers are feeling 'hurt and demoralised' by the anti-meat agenda that has labelled them the problem and not part of the solution to mitigating climate change. The simplistic argument that meat is bad and plant-based alternatives are good has been 'enormously detrimental' to farmers’ mental health, she argued. However, she did go on to accept that the farming industry will face huge change.

The Guardian article argues that 'technology is opening a whole new direction for food production, which will take farming away from the farm. Robotics and drones are reducing the need for humans to be on the land, while vertical farming, in which vegetables can be grown in sunless warehouses using LED lighting, gene editing and metagenics – the engineering of specific enzymes or proteins – are coming up with new definitions of food.' Vertical farming in my view is still very niche, but I will examine it in more depth in a later post.

However, if new technology is going to be adopted at a time when farm profits are likely to fall, some government funding to accelerate the rate of adoption would be justified.

Can agribots boost farm productivity?

It is well known that UK farming has a poor productivity record. Given the phasing out of subsidies after Brexit, farmers need to find new ways to run their businesses more efficiently.

One way forward is the use of new robotic technologies, in particular for weeding. Advances in computer vision are making this possible and The Economist reviews the potential: Robots are on the rise.

One of the companies discussed is RootWave which is located close to me in Kineton in Warwickshire. Their product uses electricity to zap weeds. Clearly a small start up company they recently acquired €6.5m of funding: Financing success

There is clearly some interesting experimentation and product development going on. But what are the chances of adoption by farmers? Capital costs are always a consideration and these agribots need skilled operators who have to be trained and then paid high wages.

Agricultural innovation usually follows a bell shaped curve with some farmers willing to be early adopters. They might be encouraged by government grants towards training and capital costs. Another round of the Countryside Productivity Small Grants Scheme is expected later in the year, but last time its budget was just £15m and the maximum any one farmer could claim was £12k which may not be game changing.