News
5th Mar

2014

Media Release 03 – Report from the National Chairman

Tenant Farmers Association

THIRTY-SECOND ANNUAL GENERAL MEETING

WEDNESDAY, 05 MARCH 2014

Report from the National Chairman

It is an honour to have the privilege of leading the Tenant Farmers Association for the next three years as National Chairman and I thank the members of the TFA’s Executive Committee for having the confidence in me to take on this important role.  I am a great believer in all that the TFA stands for and I am keen to ensure under my chairmanship that the Association both expands its membership base and influence on behalf of the tenanted sector throughout England and Wales.  No other organisation has the mix of expertise and dedication to the tenanted sector found within the TFA.  I will do my best to serve the Association and its members with diligence and to be effective in ensuring that the needs and aspirations of the tenanted sector of agriculture are articulated to policymakers, opinion formers and those who do business with our sector.

Before I go any further I must pay tribute to our outgoing National Chairman, Jeremy Walker.  To say that he will be a hard act to follow is an understatement.  He has been a conscientious and forthright force for good for the Association and its members.  He has been both thorough strategically and meticulous in delivery, aiming always to ensure that the needs of our members where put at the top of the agenda of anyone he spoke to.  I’m very pleased to say that Jeremy will be remaining on the Association’s Executive Committee and Appointments and Governance Board which will ensure that the Association has access to his expertise for some time yet to come.

I am looking forward very much to working over the next three years with James Gray from Hampshire who moves into the position of National Vice Chairman having been the Association’s Treasurer and Junior National Vice Chairman since 2011 and Mark Coulman from Lincolnshire who steps into the roles vacated by James.  I hope that we can live up to the legacy that we have been left by those who have gone before.

Looking back at 2013 it is impossible to start anywhere else but with the weather.  The extended wintry conditions over spring with easier conditions for harvest but a battering of wind and rain leading to extensive flooding over the back end of the year and into 2014, has caused no end of difficulty.  As an industry we have heard a lot about coping with volatility and sadly the weather has lived up to the worst of expectations.  It does serve to underline the extent of our fragility and why it is essential for the government and the industry to work together to ensure our future sustainability both in terms of food security and environmental management.  Strategically and tactically it is important to ensure that we find joint solutions to the problems being faced.

Of course, although I refer to natural occurrences, it would be remiss of me not to highlight the extent to which what has happened has been exacerbated by poor governance.  There is been much talk over recent weeks about the lack of river dredging.  It is true that there has been, over the past 10 years, a reluctance on behalf of Government to properly manage our river system to ensure its ability to cope with the sorts of volume of water delivered into our environment seen recently.  With successive cuts to the budget of the Environment Agency it has been retreating from front-line, flood risk management work for which it has responsibility but no statutory duty.  Recent events must serve as a wake-up call to us all.  We need to find a new solution if what we have been experiencing becomes a more common phenomenon in the years which lie ahead.

We need a fully functioning flood risk management system and if it is truly the case that this cannot be afforded from central funds, then we need to find a system which provides the benefits that we are seeking based on a fair allocation of cost.

For some time the TFA has argued that the formation and development of new Internal Drainage Boards (IDBs) should be the way forward.  Independent of Government and utilising the skills of practical individuals who understand flood risk management and drainage, IDB’s have a lot to offer.  However, even for IDBs to work effectively the Environment Agency needs to get out of their way to avoid its dead-hand on the regulatory framework causing stumbling blocks to effective operation.

The first job will be to assess the drainage framework to ensure that ditches, rivers and other water courses have adequate flood capacity and where problems are identified that they are sorted within a short period of time.  This will also include ensuring that bits of the wider infrastructure, including attenuation ponds and pumping stations are fit for purpose and carrying out the functions for which they were intended.

Costs should be met through a drainage rate levied not just on those individuals who will be direct beneficiaries of any flood risk management work, but on everyone who contributes to the flood risk in each catchment.  New developments in high flood risk catchments should also be required to contribute substantially more and ensure that they have their own flood risk management systems in place which do not simply push the problems further down into the catchment.

Effective management, flexible regulation and adequate funding are all keys to getting this right in the future and the lessons to be learned from the current devastation need to be learned quickly.

In the policy environment by far the biggest issue dealt with over the past year has been the reform of the Common Agricultural Policy.  These reforms appear to come around with enormous regularity and we all live with the vivid and disturbing memories of the debacle created by DEFRA in implementing the last reform.  Everyone wants to avoid a recurrence of those events and the TFA is in front-line engagement with both DEFRA and the Welsh Assembly Government to monitor progress.  A worrying aspect of the current implementation plan is the creation, once again, of a new computer system not only to run the successor to the single payment scheme but also the full suite of new agri-environment schemes.  Although ministers and civil servants are upbeat about the Government’s ability to deliver an effective computer system on time and on budget, sadly we have heard that all before.

Of course, most of the political decisions about implementation have been taken already.  From the very beginning the TFA has been fully engaged at all levels to ensure the best outcomes for the tenanted sector.  By far the biggest decision that we have influenced is the rolling forward of entitlements from SPS into the new arrangements to be introduced from next year.  This will ensure that, in the main, tenants can maintain control of those entitlements and the payments available under the new regime.  Of course, we are mindful of situations where tenants have been forced to surrender SPS entitlements to their landlords following the expiry of farm business tenancies containing, in some cases, draconian clauses requiring that entitlements are passed to the landlord for little or no consideration in comparison to their value.  However, the TFA is advising all tenants who find themselves in this situation to ensure that their tenancy agreements are properly checked to ascertain exactly what they are required to do.  Often, due to careless drafting, pre-existing tenancy agreements do not produce the results which landlords believe they intended.  The TFA is on hand to check any expiring agreements on behalf of members.

The TFA has also championed the cause of ensuring that any payments available under the new regime are receivable only by individuals who are actively farming.  In fact only the TFA has been concerned to ensure that this is the case.  The TFA defines active farmers as those who are in occupation of the land being used to make a claim, taking the entrepreneurial risk and in day-to-day management control.  Although the European rules and domestic plans for implementation go some way towards achieving this, sadly they do fall short.  The TFA will continue to press the case for a viable active farmer definition in our policy discussions.  We have been particularly pleased that the Environment Food and Rural Affairs Select Committee of the House of Commons agreed with our assessment of the need for a viable active farmer definition and has recommended to DEFRA that it should implement the TFA’s definition.

It is helpful that the European rules deny access to the new arrangements by individuals involved primarily in real estate services.  This would cover landlords whose principal purpose is letting out land or other property.  The rules on this are still being developed but some landlords who have attempted to remove entitlements from tenants may find that they are excluded from participating in the new arrangements which, from the TFAs perspective would be a good thing.

The TFA has also been the only main farming organisation which has argued for a limit on the amount of support receivable by individuals.  Currently, 80% of recipients of Single Payment receive less than €25,000 (£22,250).  Compare this with only 174 individuals (including organisations) in receipt of in excess of €300,000 (£267,000) and whose collective pot runs into many millions of pounds.  The European Commission had previously signalled that there would be a limit of €300,000 on individual claims but in the negotiations this has been dropped in favour of a new measure known as degressivity which will take 5% of all payments over and above €150,000.  The Government could, if it wished, apply a 100% deduction to all payments over €300,000 and so far whilst DEFRA has opposed this the Welsh Government has expressed a preference in favour.  The benefit of the cap is that the money saved can be diverted into Pillar 2 to pay for agri-environment schemes and to reduce the amount of modulation required from the Pillar 1 budget.

As well as ploughing our own furrow on certain issues with some success, we have been working with other organisations on wider aspects of the reform.  We joined forces with the NFU and CLA to argue against the Government’s plans in England to take away the maximum 15% from the budget for Pillar 1 to pay for schemes under Pillar 2.  Although we were seeking only a 9% transfer, it was good news that the DEFRA decided to reduce its plans to 12%.  Sadly in Wales the Government is planning to take the full 15% which the TFA has said is inappropriate and damaging.

We are continuing to work with other organisations on the implementation of the Greening measures particularly the madness of crop diversification.  Even in the Government’s own impact assessment it is clear that this measure will create no meaningful environmental benefit in this country.  Again the TFA has been a lone voice in arguing for the introduction of a national certification scheme allowed under EU rules which would have involved crop rotation rather than crop diversity.

On the uplands, we have been a strong voice arguing for the equalisation of payment rates between lowland and the SDA areas.  However, for moorland areas we have argued that there should be a different treatment given the extent to which non-agriculturally active land owners in moorland areas could be able to capitalise on payments illegitimately.

Instead the TFA has made a strong case for the need to have an agri-environment scheme for moorland areas focused on grazing livestock to ensure that farmers in those areas are properly rewarded for the significant agri-environment benefits that are provided through grazing livestock systems in these most fragile and important areas.  Leaving moorland farmers without the benefit of that support is unsustainable and unjustifiable.  The TFA has therefore urged both the Welsh Government and DEFRA to reconsider their positions and to discuss with the industry what might be possible to bridge the gap between sustainability and disaster.

If neither Government is prepared to think creatively about this issue, we have no option but to argue that payment rates under the new basic payment scheme should be increased for moorland in line with other areas.  However there will need to be a robust set of criteria to ensure that the payment is only received by active graziers and is not siphoned off to line the pockets of other land owners.

Whatever the outcome of these discussions the TFA will be on hand to provide information to its members on the new arrangements and to give specific advice to individuals about the impact on their businesses.

Turning to domestic matters, the TFA was pleased to be involved in the “Future of Farming Review” chaired by past CLA president David Fursdon and which reported in the summer.  Its remit was to consider what changes were needed to encourage progression into and through the agricultural industry and touched on a number of agricultural tenancy considerations.  Some of these have floundered within the Tenancy Reform Industry Group (TRIG) which had been tasked with taking forward some of the recommendations of The Future of Farming Review report.  A significant problem with TRIG is the requirement for it to make decisions only by consensus.  Sadly the CLA has used its veto to block a number of sensible proposals for reforming agricultural tenancy legislation particularly in the area of tenancy succession.  However, progress has been made on other fronts including proposals to reform the Statutory Instrument governing the repairing obligations of landlords and tenants under tenancies operated through the Agricultural Holdings Act 1986; end of tenancy valuation requirements; the use of an independent expert for dispute determination rather than arbitration and a general tidy up of some aspects of the rules regarding succession.  These agreements are all awaiting Government time for implementation.

A significant goal for the TFA continues to be the achievement of a larger number of longer farm business tenancies.  Since the introduction of farm business tenancies in 1995, their average length of term has barely been more than four years.  Whilst this might be on the margins of acceptability for arable producers, it is completely unsustainable for anyone establishing or developing livestock enterprises.  However, rather than leaping to the conclusion that the tenancy system is inherently broken, the TFA suggests that we manipulate the taxation environment within which landlords make decisions.

Since 1995 all landlords with land in their possession for at least seven years, have the benefit of an extremely generous tax advantage of 100% relief from inheritance tax on the agricultural value of the land regardless of the nature of the tenancy agreement offered.  The TFA has long questioned the extent to which the nation receives value for money for this subsidy in light of the apparent unwillingness of landlords to let for sustainable lengths of term.  As a result, the TFA argues that this tax benefit should only apply where landlords are prepared to let on at least a 10 year basis.

No doubt advisers of land owners will argue that such a change in tax law will encourage more of their clients to abandon tenancies and utilise other platforms such as contract farming, share farming, grazing licences, share partnerships and the like.  However, as part of the TFA’s strategy for taxation reform, we need also to see the Government clamping down more robustly on the aggressive tax avoidance that is occurring on a broad swathe of agricultural land farmed under the auspices of sham versions of these types of agreements.

The TFA has no argument with owners who use other types of agreements beyond agricultural tenancies where these are used in legitimate ways with both the land owning and farming parties sharing risk, entrepreneurial input, investment and management control.  However, where the agreement says one thing but the practice on the ground shows another and where the land owner obtains effectively a fixed return, clearly these agreements have been drawn up only to give the land owner access to trading status for income and capital taxation.

Understanding this and not wanting to put a major disincentive in the way of landlords looking to let longer, owners prepared to let for 10 years or more should be able to treat rent received as trading income, as opposed to investment income, allowing them to off-set costs and losses from wider business interests.

Achieving any tax change is immensely difficult but we are hoping to engage with the Treasury to make some progress in this area.

A further area of concern to tenant farmers has been the Government’s desire to free up the planning regime to make change of use of agricultural buildings easier to achieve.  Whilst this is of great advantage to the owner occupied farmer it is not such a great advantage to tenants.  Where landlords are keen to find an alternative use for assets on a holding, tenants could find themselves under pressure to allow those assets to be relinquished to the landlord for those alternative uses.  The Government’s decision to widen development permitted by the General Permitted Development Order to include commercial use of agricultural buildings has already given cause for concern.  Further plans to extend this to enter residential development is leading to greater concern.  Whilst landlords using permitted development rights will find it impossible to use Case B notices to quit for tenancies regulated under the Agricultural Holdings Act 1986, they are still in a position to use standard notices to quit which may have to be argued before the new Agricultural and Land Drainage Tribunal.  Resumption clauses within farm business tenancies would also allow early access to assets destined for alternative use.  The TFA has brought these concerns to the attention of the Department for Communities and Local Government which is responsible for this area of planning law and we have sought safeguards for tenant farmers whose landlords may be contemplating these types of development.

Bovine TB has continued to deliver misery across large swathes of England and Wales.  Although the Government, at least in England, has made a brave decision to begin the difficult and sensitive task of controlling the disease and wildlife we have also seen tightening regulation which is reducing the ability of livestock businesses to operate on a sustainable basis.  The TFA remains in discussion with both DEFRA and the Welsh Assembly Government on TB control and eradication but inevitably it is going to be a long and hard road ahead.

Whilst the rest of the country appears to be merrily signing up to major developments in renewable energy not least solar PV and anaerobic digestion (AD), the TFA has been sounding a note of caution.  The lucrative market particularly in AD is encouraging the diversion of arable land into maize production as a feedstock for large AD plants.  Sadly we have seen rents for such land reach in excess of £300 per acre.  Not only is this level of rent unsustainable for anyone looking to rent land for grazing, stock feed or even arable production, it is also of concern that these are impacting on farm business tenancy rents more widely as they are being quoted as comparables with other lettings.  Whilst the TFA has got no view on whether or not AD is a good or a bad thing, we are arguing that its public subsidy through the Feed in Tariff (around 9p per kilowatt hour for large plants) should be scrapped in view of the negative impact it is clearly having on the wider business of letting land.

Unusually we have seen major change in the leadership of many of the institutional landlords with whom we deal on a regular basis.  The Crown Estate, Church Commissioners, Duchy of Cornwall, Duchy of Lancaster and National Trust have all seen changes at the top and therefore it has been particularly vital this year that the Association has continued its engagement with these landlords.  Building on the foundation of many years of previous engagement, we seek to develop productive relationships which both challenge and support landlords to achieve good practice.  We also look to these institutional landlords to set the pace for private estates whom we lobby indirectly through our ongoing relationship with the Country Land and Business Association.

Having been, for many years, a lone voice in the wilderness calling for the introduction of a supermarket ombudsman, we were joined laterally by other organisations who saw the merit of regulation in this highly concentrated market place.  It is therefore a particular pleasure to have witnessed the appointment of Christine Tacon as the first Groceries Code Adjudicator and an even greater pleasure that she took time to attend a meeting of our Executive Committee to explain her role, purpose and objectives.  Of course, she can only be as good as the legislation allows her to be but we look forward to seeing her influence on the supply chain and the achievement of fairer practices for the benefit of all concerned.

As well as lobbying, another important aspect of the TFA’s work is advice to members.  2013 was very busy year in this respect.  Each month the association deals with almost 350 cases of advice spending around 75 hours delivering that advice.  Much of this is by telephone but a growing proportion is now conducted electronically with around a quarter of cases dealt with by email.  Members of the TFA value the specific advice and continues to be a major reason why tenant farmers both join and stay with the TFA.  No other organisation is able to give its members the dedicated and expert advice available through the TFA.

The Association is making increasing use of social networking including Facebook and Twitter.  Twitter accounts exist for both TFA and TFA Cymru and our number of followers grows daily.  These platforms provide easy and valuable access to a wide audience of individuals both members and non-members.  Our new website has been developed with the needs of members in mind.  Hopefully members will find it both accessible and informative as we seek to regularly update it with new information including briefing notes, news items and rent comparables.  Unlike other organisations however we are not abandoning hardcopy information which continues to be available to members both in the form of our regular newsletters and any other material upon request.

As I near the conclusion of my report, having paid tribute to one past chairman, I need to pay tribute to another.  The industry lost a great advocate, friend and stalwart when Jim Harrison passed away at the beginning of last year.  He gave a lifelong commitment to the UK agricultural industry in many voluntary capacities including his service with the TFA.  He was a founder member of the TFA and joined our Executive Committee as National Vice Chairman in 1985. He then went on to become TFA National Chairman between 1987 and 1989.  After standing down as National Chairman he remained an active Director and Councillor of the Association until finally retiring in 2010.

As well as his service to the TFA Jim did much to forward agricultural training, education, research & development, farm management practice and the landlord and tenant system in this country.  His interests in the development of agriculture extended to improving animal welfare and consumer confidence in farm produce. He represented the industry in many voluntary as well as paid capacities and his expertise in all these areas will be sorely missed.

The Head Office staff of the Association has seen some change in the past year due to previous members of staff moving on and, more significantly, due to a number of maternities.  The new members of the team are getting themselves quickly up to speed with their roles and I hope that members perceive that they are continuing to receive the high quality of service that they have been used to.  I want to thank the staff for all their hard work, dedication and enthusiasm and I look forward to working with them in my new role over the next three years.

My personal thanks go to my family for allowing me the time to carry out my duties as TFA National Chairman.  Without the support of my wife Jane at home and my father and brother on the farm I could not contemplate being able to fulfil my role as National Chairman.

Finally, my thanks to the members of our Association for your continuing support for our work.  I very much hope to make my acquaintance with as many of you as possible in my next three years as your National Chairman.

Stephen Wyrill

TFA National Chairman

March 2014

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