Money, money, money - some of us were able to breathe a deep sigh of relief when the Chancellor announced the Spring Budget last week. Some might argue the budget is boring and fairly banal, however, extra spending in England on childcare means that the Welsh Government will receive £180 million more through Barnett Formula consequentials, which is welcome news on the surface of things.
The Welsh Government will now carefully consider its options no doubt and decide how to best allocate that money, though there are unlikely to be any changes for agriculture funding as a result of this. In fact, there was no mention of agriculture support or measures to deal with food security in the budget, which was disappointing.
Of course there were some overall positives in there, for example fuel duty, reduced last year by 5p a litre has remained frozen at that lower level which is no bad thing in view of what are still very high fuel prices. Yes, those of us living in rural areas where a vehicle is almost essential would have welcomed even more action on this but we should be grateful that the cut has been maintained.
Also worth mentioning with our agriculture sector in mind is that thanks to higher tax revenues and lower energy prices, the Energy Price Guarantee (EPG) of £2,500 will be extended to July which has ensured that we avoided another increase in energy costs which would have occurred had the EPG not been extended. This measure will help families across the UK and will have the added benefit, we hope, of ensuring that income allocated for energy costs can be targeted at Welsh and UK produce in our weekly shopping.
The Corporation Tax change is at first glance bad for farming businesses that have incorporated as Limited Companies with the rate increasing significantly from 19% to 25%. That’s a 32% increase in the tax rate! However, changes to the way in which HMRC will deal with capital spending moving forward might result in those very same farming businesses being able to significantly reduce their tax liabilities as a result of capital spending decisions. The overall impact of the changes to Corporation Tax can thus be described as something of a double edged measure.
The acknowledgement of labour shortages in the Budget appeared to be a recognition at long last of the arguments that have been made by the agricultural and food supply sector. There are staff shortages and the Government can make a difference. The changes to child care announced for England were one step in trying to deal with this issue (and we hope that Wales will follow suit) but this measure will only have a minor impact at the margins. However, the Government also announced changes to pension allowances which will cost £875m in order to try and persuade the very highest paid to stay within the workforce.
The Office of Budget Responsibility anticipates that 15,000 workers at these high wage levels will stay in the workplace as a result which averages out at £58,000 per worker! That appears to be an odd priority in a budget where nothing was announced to help the farming and the food supply chain deal with the staff shortages that we face.
We would further argue that the freezing of Personal Allowances is a creeping tax hit on those farming businesses which trade as sole traders and partnerships and is disappointing in view of the current rate of inflation.
So, a few days after the Budget it is very welcome that the announcements have not unravelled as with previous budgets and there is a lot to be said for stability. However, in our view there were no game changing announcements from a farming perspective despite the need for some real support from Government to the sector in a time of change.
When it comes to direct funding for agriculture and measures to deal with food security, our teams are working hard to ensure that our farmers don’t get short changed through the Agriculture (Wales) Bill and our lobbying for fair farm funding continues.
