26 February 1999

Scotland is living on borrowed time

A FARMER recently sold his holding – lock, stock, and barrel – and at a good price. Then he awoke, realised it was only a dream and spent the week in a thoroughly bad mood. Many will sympathise because Scottish farming is not in good heart. A recent firming of beef and sheep markets and high potato prices cannot mask the underlying trend which is distinctly gloomy.

The 1998 farm income figures came in triplicate. The old net farm income was down 61% to £102m. Total income from farming excluding family labour at £187m was down 45%. And the new system which counts off-farm income and includes subsidies due rather than paid massaged total income to £230m and the drop to 37%.

It is the final figure that will be used from now on and, since it includes all of the £36m November aid package, the 1999 account starts off without any cushion. But, for the moment, last years £102m, using the old net farm income figure, was, after a record £520m was received in subsidies, less than bank interest for the first time in history, and borrowings reached a record £1.2bn.

A survey of individual farm results showed average subsidy at £26,300 and net farm income at just £416, down 91% on the year. Dairy farmers had a net income of £47, according to the survey. There was what Scottish Office officials called cash income of £24,000 but all that really means is that farmers are living on allowances for rent (£16,000 average) and depreciation (£15,000). Put another way, the figures show a business return of £416 for a year of investment, time and effort.

It means that Scotlands farmers are living on borrowed time because reinvestment cannot be put off for very long. It is a picture of an industry in sharp decline, increasingly dependent on subsidies, and with increasing numbers, to the alarm of bankers worried about falling land values, facing insolvency.