21 September 2001


A recent report by an

accountancy firm

makes depressing

reading and there is

little light at the end of

the tunnel either

East Anglian accountant, Larking Gowen, which specialises in agriculture, recently issued its latest assessment of the industrys profitability based on actual results achieved by its clients (Business, Sept 14).

Its report makes depressing reading, although unsurprisingly to anyone involved, it is similar to the one they published last year – only worse. The calculations are based on financial years to last October or this March and with the current year expected to show even worse returns, Larking Gowen says: "There is little to be optimistic about for the regions beleaguered farming industry".

Profits have fallen by 75% since 1996, says the firm. The majority of farmers are earning less than the statutory minimum wage, are effectively now working for nothing and are facing the toughest conditions since the 1930s. And this in a region popularly believed to be among the most prosperous in the country, where most farm production revolves around substantial acreages of arable crops including wheat, barley, sugar beet and potatoes and which has so far remained relatively unscathed by foot-and-mouth.

David Missen, a partner in the firm, comments: "There has been much talk of diversification being the salvation of the farming industry – however we believe such cases are few and far between."

He went on to point out some of the pitfalls. Diversification is usually capital-intensive and five years of falling profits means few farmers have sufficient funds; it is seldom a viable option for tenant farmers whose investment will ultimately revert to the landlord; it is available only to those with appropriate resources of capital, buildings, services and location. There is little sense in opening a roadside shop miles away from a major road.

The report concluded that almost all farms would have shown a loss last year if it were not for IACS cheques; that while direct costs are being reduced, overheads are still rising; that profits are continuing to fall.

Quote such a report to government ministers and you will get the standard reply dictated by the spin-doctors. It will begin with the catchphrase coined by Sybil Faulty when faced with one of Basils outbursts: "I know, but its the same for all farmers everywhere; commodity prices have collapsed and theres nothing I can do about it." British farmers have heard that so often they have begun to believe it.

But it is only half true. Yes, world commodity prices have collapsed. But America, whose policies in the mid-90s were largely to blame for the collapse, responded by throwing cash at its farmers in order to ensure their survival, while at the same time intimidating other countries, especially the EU, from doing likewise.

Even now, under George W Bush, who after the unimaginable terrorist attacks clearly has appalling and more urgent matters on his mind, there are proposals on the White House table to introduce counter-cyclical aid to US farmers to guarantee their prices at profitable levels. Who knows what will happen now, following the carnage, but if approved it will provide $19bn a year (about £13bn) to US farmers, or three times more than they were scheduled to receive under the 1996 Freedom to Farm legislation. And that is without "emergency aid" which, if past experience is any guide, will be added during the year.

But the situation on this countrys farms is significantly worse than those in the USA and the solution lies substantially in the hands of UK government ministers. Do you remember, for instance, the much trumpeted and very complicated Rural Development Aid announced by MAFF a couple of years ago? Farmers (and just about everyone else in the British countryside) were to share £1.6bn. The fact it was spread over seven years was glossed over and that all of it was to come from Brussels and none from Whitehall was written in small print.

When calculated on a per hectare farmed basis the amount allocated to Britains rural areas was 15th out of 15 in the league table of member nations. Assuming Britains share a hectare was 100, France got 250, Germany 300, Ireland 500, Austria 1300,Finland 1500, and so on. It is not entirely clear on what basis such allocations were made, except perhaps perceived need (hence the higher amounts to countries with more mountains and forests), the determination of those negotiating and, most likely of all, previous claims history. In which case not only is the present Labour administration to blame but also the previous Conservative government.

It is almost certainly too late to get our allocation increased, for to do so would mean reducing the sums allotted to other countries and I doubt they would wear that. But the implication, as if we didnt know, is that British agriculture has been getting a raw deal compared with other EU members for years. They also imply that when politicians weep crocodile tears over our plight, they are indulging in the worst kind of hypocrisy. They have been, or are still, responsible for the shabby treatment meted out to British farmers. And it does not surprise me one bit that when the NFU, on behalf of a BBC programme, invited farmers considering emigrating to France to register the fact on its web-site, there was an avalanche of responses.

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