Document

Ladies and Gentlemen, it is with some sadness that I make this speech as I realise that it is in fact my last speech as National Chairman to the Annual General Meeting. However, with a full year’s work ahead before I hand over to my successor it doesn’t quite feel like a valedictory.

However, I am pleased to say that despite the stringent economic situation we are facing both within and outside our industry, our organisation remains in extremely good heart. This can be seen from our financial statement for the year end 2009 which will be presented later by the Association’s National Vice-Chairman and Treasurer, Stephen Wyrill. Although we have not seen the growth in membership experienced in recent past years, our membership has remained stable over the last year with the number of overdue membership subscriptions at an historic low for the Association.

We have strengthened the Head Office team by adding a new adviser which has provided us with the ability to service more of our members’ growing demand for advice, information and support. Up to 100 advisory requests are made to Head Office by members each week. By expanding our staff resource at Head Office we have also been able to provide a better service to our members in Wales. Until now, Wales has formed part of our West Midlands and Wales Region but we are at present in the throes of developing a separate region for Wales with its own committee and members’ meetings.

Our influence on behalf of the let sector in agriculture continues to grow and as we look into this year and next with the range of issues on the political agenda facing agriculture, the Association will continue to play a crucial role in ensuring that the voice of the tenanted sector is heard loud and clear by policy makers both in the UK and within the European Union.

We will also be using 2010 as a year of preparation for our 30^th anniversary in 2011. We are taking as our theme revitalising the landlord/tenant system in agriculture and I am pleased that we have got William Worsley, the CLA President, with us later today to give us his thoughts on what we need to do to maintain and enhance the vitality of the let sector. The TFA was born in 1981 with the dual purpose of supporting tenant farmers and being an advocate on behalf of the landlord/tenant system. Both roles are as important today as they were when the founding fathers of the association launched the TFA 30 years ago.

It is clear after 15 years of Farm Business Tenancies that the 1995 Agricultural Tenancies Act has not succeeded in providing a better framework for the landlord/tenant system than the 1986 Act tenancies they replaced. Yes, more land is being let but it is typically for short durations on restrictive terms. There appears to be a lack of long-term thinking amongst virtually all categories of landlord and in the absence of the market doing what is required to ensure the sustainability of the let sector for the future of our nation, it is time again that the Government should consider what it needs to do to correct the market failures that exist. Obviously, whilst we need to be bold, we also need to ensure that we do not act recklessly. It will therefore be important to listen carefully to what the CLA President has to say to us. However, we need a system which allows tenants the security to invest and develop their businesses whilst giving a fair return to landlords. The current system whilst providing a return to landlords is far from adequate to provide the stability and security that farm tenants need to develop sustainable, long-term businesses.

For many landlords the taxation framework within which they operate is a big driver in deciding how they will manage their land. A big advantage to the taxpaying landlord is the ability to have 100% relief from inheritance tax for the agricultural value of their holdings let after the 1^st September 1995. However, as an Association, we are beginning to question that this relief should be so widely available. What is in the national interest from providing a landlord with such an advantage when his response is to let for only a short period of time on restrictive terms?

Perhaps it is time to consider a radical reform of the inheritance tax framework which, whilst ensuring that bona fide farmers receive inheritance tax relief through a properly functioning scheme of Business Property Relief, removes Agricultural Property Relief apart from for those landlords who let their holdings for long terms. At the same time we would encourage the Government to take a stronger line to restrict land owners from claiming Business Property Relief when using arrangements which on paper are termed contract farming arrangements, share farming agreements, partnerships and grazing and cropping licences but hide what in practical terms in their out-working are tenancies given the negligible risk to which the land owner is exposed and the lack of his active management of the holdings.

This we believe would encourage a longer term approach which will be beneficial not only to the tenanted sector but to our nation as a whole as it will allow a greater degree of stability for investment which will contribute to our food security and long term environmental performance.

We also understand that a major disincentive for landlords looking to let land is the income tax treatment of the rent. As an Association we agree that it would be unfair for a landlord who has let on a long term basis to have to treat the income earned as investment income as opposed to earned income from which he can off-set other costs from his wider business interests. We would therefore deem it appropriate that landlords letting for longer terms should be able to declare their income under Case 1 Schedule D (earned income) rather than under Schedule A (income from investment assets). We would also see this change coupled together with restrictions on access to Case 1 Schedule D where land owners are using the sorts of arrangements I referred to earlier where we believe that Business Property Relief from Inheritance Tax should be restricted.

There are other aspects of the fiscal environment within which landlord/tenant decisions are made which have already been addressed by the Tenancy Reform Industry Group in its 2003 report. It is time that the Government re-looked at those proposals along with the others I have suggested today and we will be using this year and next year to promote them again.

Of course, taxation is not the only driver in the market place particularly since there are many institutional landlords for whom taxation is not an issue. In our regular meetings with the largest institutional landlords we have detected a distinct shift away from long term thinking and long term planning towards dangerous short-termism. This is best characterised by the current position of the Church Commissioners who typically will not let any land or farms for anything more than three-years. It sees its role as being no more than a commercial pension fund for its beneficiaries whilst having little regard for long-term sustainable land use, investment or community development.

Other landlords such as the Crown Estate are also taking an increasingly short-term approach when considering letting farms. We are seeing more farmhouses split away from agricultural land and let on Assured Shorthold Tenancies which very much changes the dynamic for farm tenants who find themselves with an FBT on the land for one length of term and an Assured Shorthold Tenancy on the house for another.

Of course there are exceptions. We were heartened by the Duchy of Cornwall’s intention to look at letting new holdings for a period of twenty-years and by the Duchy of Lancaster’s continuing stance to support long term succession tenancies. Unfortunately though, this long term thinking is now the exception rather than the rule and we have been left in that position by the de-regulation of the housing legislation, farm tenancy legislation and the lack of reform to the taxation environment. These are all things that as an Association we need to work on over the next few years.

A very special segment of the landlord/tenant sector is County Council Smallholdings. They remain a vital entry point into agriculture for the majority of individuals looking to farm in their own account when they have neither family-owned land nor rented land available by succession. These county farms are under the most intense pressure given the extent to which the local authorities who own them face tighter and tighter financial constraints on a year-on-year basis. The temptation to sell off County Farms in order to plug a hole in local budgets is becoming intense. However, we would argue that the same rules of sound and prudent financial management should apply whether in want or plenty.

Local authorities need to manage the County Farms in their ownership in the context of a wider asset management plan much in the way that Gloucestershire County Council has done in the past. Through careful, planned and strategic disposals of small parts of their estate for high development value, Gloucestershire has been able to raise £100 million of value from its estate over the past thirty years whilst seeing little reduction in the overall area of the county farms estate overall. I accept that this has not been easy to achieve but it provides best value to council tax payers in comparison to the return council tax payers would see from a distress sale of assets.

We are grateful for the continuing support of Defra and Sir Don Curry on this matter since they see the wider benefits that the County Farms system can provide to our nation in terms of food security, environment, education, landscape policy and renewable energy. We must not let County Farms disappear for short term financial expediency.

Another important function for the TFA and one which we are finding that we have to do increasingly is to be advising the Government of the landlord/tenant impacts of its new policies. A particular case in point has been with the launch of Uplands ELS. The Government has decided to abolish Hill Farm Allowance and to replace it with an uplands strand of ELS. However, in so doing, it has changed the whole basis for eligibility of the payment. HFA had been previously available to graziers and short term tenants regardless of the length of term of their occupation. Now applicants to UELS will have to show at least five-years future land occupation which in many cases will not be available. Tenants will also be unable to access Uplands ELS if their landlords are already participating in ELS using the land they rent and don’t wish the change.

We were grateful to the Secretary of State, Hilary Benn, for providing us with an extra year for these issues to be considered by the Tenancy Reform Industry Group. And whilst there was a consensus within the Tenancy Reform Industry Group as to how these issues should be tackled, it was with regret that Defra officials decided not to make any changes to the scheme and launched it on the same terms upon which it was initially planned. Whilst the Tenancy Reform Industry Group has now issued some detailed guidance it falls short of ensuring that tenants have the necessary legislative protection that we were looking for.

There appears to be an increasing lack of understanding amongst policy makers of the way that land is used and managed in the countryside. This is leading to the production of schemes and initiatives which cause major problems in the landlord/tenant context. We are therefore calling for the Government to “tenancy-proof” all new proposals for new policies by ensuring that they are first scrutinised by the members of the Tenancy Reform Industry Group. This should ensure that such problems in the future, as have been caused by the launch of Uplands ELS, will be avoided.

Staying on the theme of the uplands, we are gravely concerned that the current policy towards upland agriculture is at best misguided and at worst severely damaging. The removal of HFA will create a major cash hole for many upland farmers whilst others are in some cases receiving large amounts of money for schemes which require stock to be taken off the hills for dubious environmental benefit. Many of these payments are going to landowners as opposed to active farmers and graziers.

We described Natural England’s published vision for the uplands as a fairytale – long on dreams and short on dealing with the practical issues that need to be addressed in upland agriculture. We have, however, been more encouraged by the work being carried out by the Commission for Rural Communities which has bothered to interview real people in upland environments to find out their views. The Commission has taken a vast array of evidence, both orally and in written form and was due to present its report to Government earlier in the year. Unfortunately, we understand that this has been delayed probably until after the General Election. We would urge any incoming Government to pay serious attention to the conclusions of the Commission’s work when considering future policy for the uplands.

We are also entering an era of a further round of CAP reform. The new Agricultural Commissioner from Romania has promised the production of a consultation document which is imminently expected leading to a commission communication to the Council of Ministers towards the end of the year quickly followed by legislative proposals early in 2011. The danger this time around of course is the new role for the European Parliament in the reform process. Whilst in the past the Council of Ministers merely had to take note of Parliament’s views and do nothing with them, in the future the Council of Ministers must take on board all of the Parliament’s wishes. This could lead to the deliberations on CAP reform lasting up to three years which will take us one year beyond the current financial perspective which ends in 2013.

The TFA will be active this year in ensuring that the EU continues to promote a strong Pillar 1 and that the rules at a European level do not provide too much flexibility for Member States to pursue their own agenda as we know that our own Government would like to see Pillar 1 wither on the vine with support being delivered instead through Pillar 2.

We also believe that the Government needs to review who is able to access the agri-environment schemes funded through Pillar 2. Too often it is the land owner who is in receipt of payments even where the land is being let out or used for agricultural purposes by another person. The TFA believes that it is the active user of the land who should be the recipient of any agri-environment scheme payments and not the landowner. The government is often keen to highlight the extent to which farmers are in receipt of agri-environment scheme money when in fact a large proportion of it is going to support landowners.

The return to the landlord should be through the rent paid by the tenant. That rent should reflect the opportunities available to the tenant in farming the holding, entering agri-environment schemes or through alternative uses permitted by the tenancy agreement.

That said if we are really going to face the challenges of feeding nine billion people on this planet by 2050 we must continue to ensure that we are supporting agricultural production. We in the UK and to a lesser extent across Europe already have more stringent animal welfare and environmental regulation on our operations than other parts of the globe. These come at a cost to the farming industry. We are not arguing that we should return to the past in respect of these issues but we do believe that the Government cannot expect to have it both ways. The extra costs which we face are not recoverable from the market place, therefore they must be recoverable through the public purse.

Of course the Government has at last woken up to the challenge of food security. For many years, Government spokesman have found it impossible to use the words “food” and “security” in close proximity in the same sentence. That changed at the 2010 Oxford Farming Conference when Hilary Benn announced his Food 2030 Strategy. Two memorable quotes from his speech to the Conference were as follows:

However, in opening the pages of the small, A5 glossy leaflet presented to us it is difficult to see what this strategy means in practical terms. It is full of warm feelings, platitudes and aspiration but there is little of the mechanics that one would expect to find given the size of the challenge facing us.

It is easy to see where the gaps are though. The document failed to address a number of key issues. It failed to address the Government’s continuing inactivity on eradicating bovine TB, it failed to address the sustained threat overhanging the arable industry of the potential future re-introduction of set-aside, it failed to address the Government’s reasons for not grant-aiding new slurry storage capacity required by dairy and livestock farmers due to enhanced NVZ regulations, it failed to address why it is the Government’s intention to pass exchequer costs for animal health policy onto the industry, it failed to address why the Government deemed it appropriate to remove Hill Farm Allowance making farm incomes more unsustainable in upland environments and it failed to address the heavy and unsustainable burden of cross compliance and regulatory inspections.

Whilst there were many who applauded the Government for its new policy and new thinking, we in the TFA have likened it to the fairytale of the emperor’s new clothes. There is nothing that we can see that is worthy of applause apart from the fact that the language has certainly changed.

We are however more encouraged that the Government has decided after many years of inaction to create a food industry ombudsman to oversee a new code of practice for the grocery sector. The consultation process is underway and whilst we do not believe it will be a silver bullet we are sure that it will help to create more sustainable relationships in the food chain.

I have highlighted just a few of the areas in which the TFA is active on behalf of its members and the wider tenanted sector. Everyday is a busy day in the TFA and I can see that I have much to do in the year that lies ahead. I am aware, however, that there are many tenant farmers in the country who have not yet joined the TFA. As an association we take a pragmatic, practical and down to earth approach. We are not afraid of taking a stance which we believe is correct when other organisations might look to an unsustainable compromise.

I also believe that the advisory services we provide to our members are second to none. Many members report the significant benefits they have obtained through the advisory services offered by the TFA. I would encourage all those hearing or reading this speech who have rented land and who have not yet done so, to take a look at the TFA and what we can offer you, your business and your sector.

TWENTY-EIGHTH ANNUAL GENERAL MEETING

TUESDAY 09 MARCH 2010

National Chairman’s Speech