PROPOSAL 4

A Cumulative Low Interest Loan Scheme for Farming  

Along with our Minimum Price Protection guarantee scheme and higher annual agricultural budget recommendation we aim to tackle the profitability crisis in farming with the creation of a cumulative low interest loan scheme to encourage farm diversification and boost the rural economy.

Higher agricultural budget levels will mean better grant funding and this certainly will alleviate many of the liquidity issues that farm businesses face with regard to investment into crop production improvements although profits will take time to be realised and thus be available for reinvestment elsewhere within the business.

We therefore believe a similar liquidity stimulus is needed with regard to farm diversification. If measures are taken to encourage the growth of profitable ancillary incomes alongside primary agricultural production, then economic rejuvenation will occur and the financial resilience of farm businesses will be greatly improved. We firmly believe that diversification stimulus working together with an improved agricultural budget and commodity price protection will create a positive feedback loop that will not only solve the profitability crisis quickly in the short term but will also help future proof farm businesses for the long term and contribute to a strengthened wider economy.

The diversification sector has by necessity become increasingly important for farm businesses in recent times and many now realise that adding another string to your bow can indeed be a lifeline when times get tough. However, de risking a farm income portfolio is not the only positive aspect of this activity, there are many beneficial knock-on effects felt in the local community and diversification really can play a key part in achieving a renaissance of small businesses enterprise in a thriving working countryside.

For example, the building of new rural workshops spaces or the addition of more holiday lets for the tourism industry will create both jobs and social wellbeing. Environmental and resource use efficiencies can also be gained, take the example of a woodland manager who now has a workspace available to convert thinnings to firewood or charcoal for local supply. The managed woodland will in the end produce better quality lumber, its habitat for wildlife will be improved and it will provide products through its management which were previously a non-captured resource. In the case of charcoal most of this is at present imported with some brands being produced by clear felling of mature forests in other parts of the world, therefore the case for diversification encouraging environmental improvements at home and even beyond our own shores is hard to deny.

A low interest loan scheme which enables farmers to diversify their businesses is a must, the positive stimulus from such a scheme in related industries and the wider UK economy would be undeniable as would the increase in the resilience of our agricultural sector. We therefore propose:

i) The introduction of a cumulative low interest (0.25%) loan scheme for farming. Funded by a 31% reduction in our annual foreign aid budget the scheme would provide every agricultural holding in the UK with a loan of up to £20k per tax year to help fund growth or creation of farm diversification projects. Each £20k annual allowance would if unused rollover into the following tax year hence the cumulative nature of the scheme.

ii) Use of the loan would be restricted to any farm diversification project aimed at generating ancillary income separate to primary agricultural production.

iii) Inheritance tax law should be amended to ensure any assets developed for such purposes were made eligible for Agricultural Property Relief.

Notes

The cost to the taxpayer from this scheme would be zero, funds would simply need to be redirected from another budget. No further money printing would be required, therefore no additional losses to personal spending power would be suffered by the public due to inflation caused as a result of the scheme. In fact given full uptake of each annual 4 billion fund at 0.25% interest £10 million would be generated for the treasury as income each year…..one would like to think sufficient enough to administer the scheme and leave a profit for the taxpayer.