Land prices and farming's uncertain future in the UK

The most recent trip was to a farm walk organised by the local NFUS to Bee Edge on the Berwickshire coast. The farm is about 400 acres. Like many in the area it grows crops and still has a livestock enterprise.

The farmer, Will Hamilton, has three children but only his daughter Annabel is interested in taking over the farm. Will’s family were originally from East Lothian and were renowned for their expertise as cattle feeders. He has outside interests so that the cattle numbers of about 300 mainly Limousins are much lower than formerly.

Finding even that number of the standard of beast that Will wants is becoming more difficult. Annabel is much more interested in the arable enterprises, which have been greatly expanded by contract cropping other farms in the neighbourhood. The impression given was that as Will gets older or busier the cattle may reduce further.

At the barbecue before the farm tour a farmer from Midlothian told me that seven farms in his area are farmed by ageing parents whose children have no wish to continue. At the same time, it is obvious that many times their number are desperate to farm but are finding the doors closed.

This is partly due to the price of land which no longer bears any relationship to its productive value.

I looked at an article about land prices, which I wrote in TSF in 2001, when I was an agricultural valuer. A decade previously Peter Clery, a well-known agricultural banker, who had written the book ‘Green Gold’ about land tenure, had addressed the Scottish Agricultural Arbiters Association on the subject of land values. His rule of thumb was that it should be five times gross output.

At that time an acre of land producing three tonnes of wheat at £60 and getting subsidy would be worth £1350 to be sustainable. Arable land was actually making £1800 per acre and good pasture £1000, which didn’t include buying the farmhouse. In 1979, shortly after our entry to the EEC, land rose to 6.7 times output. Within a few years, after interest rates rose to 15% and we had several years of poor weather, the multiple dropped to 3.4 (and that probably included the farmhouse).

If we update the formula to 2024, four and half tonnes of wheat at £200 plus Single Farm Payment of say £100 gives a total output of £1000. Multiplied by five; £5000 would only buy half an acre.

The traditional way to enter farming for those without enough capital to buy land has been to take a tenancy. We recently read in TSF and elsewhere of the reluctance of landowners to let their land and their termination of existing tenancies at any opportunity. Leases, if given, are shorter, with no security.

Increasingly the land is taken back in hand and contractors are engaged to do the work. Farmhouses and workers cottages are sold or leased to outsiders, stock workers drift away and fences are allowed to decay, so reintroducing cattle or sheep becomes impossible. Landowners have tried farming themselves in the past and sometimes found that they made more, had less trouble and their farms were better maintained by having a good tenant so the farms were relet.

This time, once the infrastructure has disintegrated, returning to how it was is beyond comprehension.

The new Labour Government has promised not to raise Income Tax, National Insurance and VAT for five years. This was a vote winner as these taxes, although the fairest, are the most obvious and all affect the proverbial ‘hard working British people’. What we all want to know is what taxes they ARE going to increase as the money to maintain our creaking infrastructure and repay our huge national debt must be found.

Almost certainly there will be an equalization of Capital Gains Tax and Income Tax. Protected pensions which don’t at present attract IHT are in the cross hairs. Keeping the baseline for IHT relief at its present level when houses have steadily increased in value has provided part of the answer up to now and doesn’t affect the poorest of the community. At the moment, if a house is left to a direct descendant, up to £175,000 can be added to the £325,000 nil rate band.

Agricultural assets, including land, farm buildings and appropriate farm houses qualify for 100% relief so, with foresight, the viability of farming businesses is ensured.

No doubt Agricultural Property Relief too will be under the microscope. Government would love to target ‘the lilies of the field who toil not neither do they spin’ who are investing in farmland to avoid inheritance tax. How they would do it without ruining ‘the hewers of the wood and drawers of water’ who actually farm and who couldn’t afford to pay remains conjecture.

Bee Edge is only a short distance from Reston. For two days every year the local auction mart was for me the centre of the universe. The old mart building still stands. It is overgrown with thistles and willowherb and there is a large hole in the roof. At the ewe sale we sold as many as eleven lots starting with a hundred fully warranted Blackie drafts, all from one hirsel, and finishing with a few young shotts.

The calf sale started at 9.30am and finished long after dark. The noise from newly weaned calves could be heard a mile away. There was a long waiting list to get on to the ballot and some of the buyers would take home five hundred calves. Will could have filled his courts with top quality cattle in one day within a few miles of his farm.

We can’t turn the clock back and the good old days weren’t always good however the loss of livestock, the loss of people and since Brexit, the loss of influence on an indifferent government of whatever stripe promises interesting times ahead.