Little cheer for farmers in Browns latest Budget
By Robert Harris
FARMERS will gain little from this weeks Budget, which contained no specific measures to help the industry fight its way out of crisis.
Fortunately, experts agree it is unlikely to stoke up the currency markets, and, therefore, interest rates and sterling. Farmers have received some encouragement to reinvest. But steep rises in fuel costs are especially unwelcome.
"The money markets seem to have received the Budget quite positively," says Derek Wilkinson, senior economist growth with the NFU. "But there is some concern that the chancellors economic growth forecasts were a bit optimistic."
In his statement, Gordon Brown said he expected growth to remain at 1-1.5% this year, before rising to 2.75-3.25% by 2001. "If he falls short of this target, that could put pressure on interest rates, and sterling," says Mr Wilkinson.
But reduced spending on social services, lower interest payments on government debt and previously announced tax increases will fund much of the tax-cutting measures and extra payments to families, education and enterprise announced this week.
"This suggests a prudent budget, which is unlikely to spook the markets." He reckons interest rates should fall much as expected, perhaps to 5% by the year-end.
David Turner of accountant PriceWaterhouseCoopers believes the chancellor could have helped farmers by extending time limits for carrying losses back into earlier, profit-making years, allowing past tax to be claimed.
And changes to capital allowances could have helped pig farmers claim for stall-and-tether ban costs, says Mr Turner. "Many farmers were not too worried about direct rate taxes – you need to make a profit first," he adds. But the income slump means many will benefit from the new 10% tax rate next month, he believes.
First year allowances on plant and machinery will stay at 40% until July 2000, says Clive Buckland of accountant Grant Thornton. A new 10% lower rate of corporation tax will help further.
"Given the downturn in farm incomes, I think this will benefit quite a few farm companies. It could also encourage some small businesses to incorporate."
But the rise in stamp duty is bad news, says Mr Buckland. "The extra 0.5% for all transactions above £250,000 will affect even quite small parcels of land."
The 6% rise in fuel duty will hit farmers badly. "This is a major blow to Wales where rural fuel is already considerably more expensive than in towns," says Emyr James of the Farmers Union of Wales.
The Scottish NFU agrees. "The problems facing rural transport are being reviewed by the government. Until that review is complete, it is inappropriate to impose more increases," says president, Jim Walker.
lBudget analysis – page 22. *