Chancellor of the Exchequer George Osborne used his Autumn Statement and Spending Review to detail £20bn in budget cuts, including a 15% cut to Defra.
Mr Osborne said: "Defra’s day-to-day budget falls by 15 per cent in this spending review... But we are committing over £2 billion to protect 300,000 homes from flooding.
Our commitment to farming and the countryside is reflected in the protection of funding for our national parks and for our forests - we are not going to be making that mistake again."
The agricultural industry responded to today's Autumn Statement:
NFU chief economic adviser Gail Soutar said: “The Chancellor has announced that the Defra day-to-day operating budget will be cut by 15% and we must wait for more details before understanding the full impact of this on farmers. It is reassuring that the flood defence budget will be ring-fenced and that the Government will prioritise spending on animal and plant disease prevention, for example by continuing to invest in implementing its 25-year strategy to eradicate bovine tuberculosis.
“The Chancellor also said he would invest £12bn in capital infrastructure and a boost to the Government’s digital service. As part of this, he said he was introducing a digital tax account by 2020 to replace tax returns, including new reporting requirements, and a consultation on tax payment dates. We will be following this closely to assess its feasibility for our members.
We are disappointed that there was no mention of how farmers, many of whom are among the 5% who struggle with broadband access, will benefit from improved broadband facilities. It is absolutely vital that broadband services in this country are fit for purpose. We need a firm commitment from Government to deliver superfast broadband for all – what we don’t need is an increased divide between urban and rural communities.
“We are pleased that the Chancellor said that tax credits would not be cut from next April, as previously planned as this will help many farming families who are experiencing falling incomes
“It is disappointing that the Government has decided to end the micro employer relaxation of PAYE ‘on or before’ reporting from April 2016. This will impose a significant additional burden on many agricultural businesses engaging seasonal workers at harvest time. Larger employers will, however, be concerned at the rate of the new Apprenticeship Levy of 0.5% of payroll costs from April 2017.”
Today’s Chancellor’s Autumn Statement offered little to help farmers currently struggling with low farm gate prices – but there were some measures to ease strains on the rural economy, said Tim Price, NFU Mutual Rural Affairs Specialist.
“Firstly, there was relief that the Chancellor didn’t use the excuse of lower petrol and diesel pump prices to increase the duty on fuel – easing pressure on motoring costs for country people who have limited access to public transport.
“Concerns that cuts to police budgets would result in poorer policing of rural areas were allayed as the Chancellor decided not to make the widely-forecast cuts to their funding.
”For the long-term, the announcement of a new Precision Agriculture Innovation Centre and £50m funding for two agricultural technology centres are great news which should help farmers become more efficient and better to compete in world markets.”
Analysing measures affecting farmers’ pensions and taxes, Sean McCann, Chartered Financial Planner at NFU Mutual, warned that further changes to restrict the growth of the buy-to-let market would make this a less attractive option for many farmers.
“The Chancellor’s surprise announcement of 3% extra Stamp Duty on buy to let and second home purchases from April 2016 combined with a new measure reducing the time when Capital Gains Tax must be paid from a maximum of 22 months to 30 days after selling a buy-to-let property from April 2019 is yet another blow for this sector,” he said.
Nick von Westenholz, CEO of the Crop Protection Association said, “We recognise the pressure on government to find savings and accept that reductions in public spending are inevitable. Whilst we still need to examine the detail, we are pleased that it appears Defra’s budget has not been cut as deeply as anticipated. However, we are concerned at any cuts which diminish government’s policy capacity across agriculture, and in particular on crop protection issues.
“Policy around plant science and the approval and use of pesticides is a complex and sometimes controversial area, and one where the UK government must ensure it is properly resourced. It is especially important that government continues to be able to promote UK farming at the European level and deploy its expertise on crop protection issues in Brussels.
“It is also vital that budgetary reductions do not impact on frontline programmes. In particular, where government funding contributes alongside private investment in supporting crucial environmental schemes such as the Campaign for the Farmed Environment, any reduction in public funds must be balanced carefully against the need to protect and enhance our environment.
“Elsewhere there are a number of research projects which have been joint funded by the government and industry and it would be counterproductive to abandon research where significant investment has already been made. Through the Agri-Tech Strategy the government has demonstrated its commitment to making the UK a world leader in agricultural technology and innovation; we want to see that work continue.”
British Veterinary Association President Sean Wensley said "In recent years we have already seen the impact of significant cuts to Defra's budget on veterinary fees for TB testing and other OV services and on disease surveillance so further cuts are of concern, although we are pleased they are not as severe as originally forecast.
“We welcome the Government’s announcement that spending on animal and plant health will be prioritised, particularly the continued commitment to implement the comprehensive bTB eradication strategy. We also welcome the capital investment in Defra’s science estates and equipment in order to enhance national disease outbreak response capabilities, which we hope will help support vets in the vital frontline role they play day-in day-out on the ground.
“However animal welfare was noticeably absent from the announcement, and BVA will continue to press Defra to ensure animal welfare policy and research remains a priority."
David Missen, Head of the Agriculture Sector at MHA, the UK-wide association of accountancy and business advisory firms, made the following observations on today's Autumn Statement, "The Chancellor's statement on the acceleration of Capital Gains Tax (CGT) payments on the sale of residential property is likely to cause some significant problems across the farming industry. CGT is not calculated like income tax - it is often necessary to go back over 30 years to find base costs and improvement expenditure, and the tax payable will also vary depending on other transactions which may take place later in the year. This looks like something which will slow down transactions and cause considerable friction between buyer and seller.
The news that most self-employed people will be required to update HMRC quarterly on their tax affairs (which presumably means quarterly accounts) from 2016, is not likely to be well received by the farming community. This presupposes that everyone has working broadband - and more realistically it means that what used to be an annual visit to the accountant might become something a bit more regular. No doubt it will be a money saver for the government, but an additional level of administration and cost for the taxpayer. There will also be a consultation on aligning (which will mean accelerating) tax payment dates to bring them closer to when profits arise. Again this seems unlikely to help cut bureaucracy in the farm office".
The Aldersgate Group, an alliance of leaders from business, politics and civil society that drives action for a sustainable economy, said that it was unlikely the Autumn Statement had done enough to allow the government to meet its environmental objectives effectively.
Recognising the difficult challenge faced by government in addressing the deficit, the Aldersgate Group welcomed the government’s decision to increase climate finance, maintain support for the purchase of low emission vehicles, commit to an increase in funding on low carbon heat and protect the budget of the FCO, a department which performs important functions in climate change diplomacy and in setting up trade opportunities for UK businesses.
However, it was unclear how the government’s proposal to increase funding for low carbon heat whilst saving £700m would help deliver the increase in low carbon heat required by the UK’s carbon budgets. The proposal to insulate one million homes during the course of this Parliament also amounts to a significant drop compared to the number of homes which took on energy efficiency measures during the course of the last Parliament.
Nick Molho, Executive Director of the Aldersgate Group said, “Without rapid investment in energy efficiency and low carbon heat at scale, it is difficult to see how the UK will meet its Fourth Carbon Budget at least cost and on time. The government needs to do much more to improve the energy efficiency of our building stock and explain how its new proposals will deliver the increase in low carbon heat that the Committee on Climate Change has been calling for. It is also unclear how the government intends to allow further investment in cost-effective renewable electricity projects outside of the offshore wind auctions announced last week.”
The Aldersgate Group however welcomed the Government’s increased focus on apprenticeships and highlighted that a comprehensive strategy was needed to ensure the UK’s workforce was equipped to benefit from the employment opportunities that the transition to a low carbon economy had to offer. This will be the subject of a major Aldersgate Group event in Parliament next week.
Referring to the spending cuts of 15% at DEFRA at 22% at DECC in particular, Nick Molho said, "Government departments such as DEFRA and its regulatory agencies provide important – and often overlooked – services that are key to the effective functioning of our economy. These include providing access to high quality natural resources such as water and interpreting UK and EU environmental legislation in a way that is pragmatic and can support business innovation. The implementation of the different settlement plans must ensure that these government departments and their regulatory agencies have sufficient resources to continue providing these services effectively.”
Pointing to the fact that businesses were awaiting clear policy signals to increase investments in the UK’s natural capital, Nick Molho added, “As the Aldersgate Group highlighted in its report last week, the government has the opportunity to drive greater levels of private investment in improving the state of the UK’s natural assets in a way that would support the competitiveness of the UK economy and wouldn’t jeopardise its objective of tackling the deficit. Doing this requires greater policy co-ordination between government departments to support projects that are mutually beneficial and helping support the financing of natural capital projects by making existing subsidy schemes more efficient and developing markets for ecosystem services.”
Peter Garratt, senior partner at Intellectual Property firm Mathys & Squire, stated “We welcome the Chancellor’s recommendations in today’s Spending Review and Autumn Statement. We are delighted that Osborne has vowed to continue the Government’s commitment to maintaining the UK’s position as a world class centre of research with further investment in science. He has promised to protect the £4.7 billion science research funding in real terms for the rest of the Parliament as well as to deliver on the long term science capital commitment of £6.9 billion between now and 2021.
We look forward to seeing how the Government takes forward the recommendations of Paul Nurse’s independent review and hope that legislation will be passed in due course to introduce the new Research UK body that has been recommended in order to work strategically with the seven Research Councils across the UK. The Chancellor has also vowed to invest over £130 million in DEFRA’s science facilities which will be welcomed by the farming community.”
The anaerobic digestion industry today welcomed the spending review support for green gas. The Government’s energy policy “reset” announced last week will see support for indigenous sources of gas prioritised, and with the financial resources provided by HM Treasury today, the anaerobic digestion industry will look to play a leading role in the UK’s future energy mix.
The industry remains concerned, however, by the risk of hiatus before significant additional resource is available within the allocated RHI budget from 2017-18. ADBA is calling for DECC to set out their plans as quickly as possible in order to provide certainty for developers and investors.
ADBA’s Chief Executive, Charlotte Morton, commented “We welcome the government’s commitment today to delivering renewable heat. Indigenous, baseload green gas will continue to be a vital part of UK heating, and ultimately biogas alone has the potential to deliver 30% of domestic gas demand. Making RHI funding available for new projects to 2020/21 will clearly help support our industry’s ambition.
“We look forward to continuing to work with the government to ensure the best possible outcome for green gas within the RHI budget, and to help our members deliver new biomethane and biogas heat projects.
“The Chancellor’s decision to delay significant growth within the RHI budget next year, however, leaves uncertainty around the level of funding which will be available for new projects in 2016. It’s challenging for any industry to endure a period of hiatus where jobs and investment are put on hold – or even at risk – as businesses wait for government policy to catch up with growth capability.
“Given that the UK still needs 20TWh more renewable heat by 2020 to meet the government’s 12% target – with AD able to deliver a third of that – delays in biomethane deployment will jeopardise our ability to meet this target.
“And of course delays impair the industry’s ability to improve energy security as the UK becomes increasingly reliant on imported gas from volatile parts of the world – a concern which was raised during yesterday’s House of Commons Energy & Climate Change Committee hearing with the National Grid.”
Responding to the Chancellor’s Spending Review and Autumn Statement on behalf of UK food and drink, Ian Wright CBE, Director General of the Food and Drink Federation, said “Food and drink – Britain’s largest manufacturing sector – has always enjoyed staunch support within government from DEFRA. Naturally we’re speaking with colleagues in that department to understand the impact any cuts will have. It’s particularly important, given DEFRA’s express ambition of helping Britain become a “Great Food Nation” that our ability to continue to grow, be more productive and to meet stretching export targets continues to be championed within government.
“Government’s emphasis on research and innovation is both timely and heartening. Now more than ever we need more support for post-farm gate, pre-competitive and collaborative research in food and drink manufacturing, all vital ingredients in enabling our sector to take on and tackle today’s challenges, and tomorrow’s.
“Growing apprenticeship numbers is a key ambition for the UK food and drink industry. Reform is needed to make this route more attractive, and an apprenticeship levy system that is proportionate, simple and works for businesses of all sizes will be a key ingredient in achieving this. The rate announced today will be a cause of concern for larger businesses, and may hit company investment pots for staff training and, perversely, new apprenticeship starts. We look forward to working with the new levy board, in particular to make sure that due attention is paid to improving the quality of apprenticeships, not just increasing the volume.”
