Comment: Farmers left with many unknowns despite Budget positives

Margaret Donnelly

Margaret Donnelly

Budget 2018 has delivered some headline bonuses for farming, but the underlying figures will leave many farmers disappointed as the fundamental issue of income volatility remains in their hands to deal with.

When the Minister for Finance Paschal Donohue took to the floor of the Dail yesterday it was interesting to note that it was a good 40 minutes into his Budget speech before he mentioned the agri-food sector in any detail.

This was in marked contrast to his predecessor Michael Noonan, who prioritised farmers in his last budget.

Back then, the sector was lauded as the saving grace of a country on its knees. But this is now and the agri-food sector is facing a huge crisis in the form of Brexit and the beef sector in particular, as a trade deal with South American countries threatens to cripple Irish beef production.

This year one of the key themes of the Government’s budget was to ‘Brexit proof’ the economy, but it looks like farmers could be the least Brexit-proofed of the agri-food sector.

Putting his money where his mouth is, the Minister for Finance allocated €300m in low-interest loans to SMEs to help deal with Brexit, but farmers, who have been identified as the sector most exposed to Brexit, will have to be happy with just €25m in similar loans.

Many will question why the banks, which will play a key role in administering the low-interest loans, are not providing loans at similar interest rates to their European counterparts. Further, such low-interest loans do not address the issue of income volatility.

Indeed, calls for changes to the taxation system that would allow farmers put money away in a good year, for a rainy year, failed to materialise. And it’s a pity as farming incomes can vary significantly from one year to the next. Income volatility is a growing feature of Irish farming as Irish food and drink becomes more exposed to worldwide currency and demand fluctuations – all impacting on the farmer’s bottom line. 

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The announcement of changes to solar farming regulations, which will allow the leasing of agricultural land for solar farming, sounds like a great incentive to get the 200-plus solar farm planning applications further along the pipeline towards reality.

However, stumbling blocks that seem to have been overlooked include the fact that to qualify as ‘agricultural activity’ for the purposes of specific Capital Acquisitions Tax and Capital Gains Tax reliefs, less than 50pc of a farm can be under solar panels - not an easy feat when many solar farm development companies look for a minimum of 40 acres and some over 100 acres.

At farm level, increased budgets for schemes such as the Areas of Natural Constraint (ANC) and the Targeted Agricultural Modernisation Schemes (TAMS) will benefit farmers, but some will be miffed that they are still €500 behind employees in income tax credits.

But the real unknown is whether the increase in the commercial Stamp Duty rate from 2pc to 6pc will apply to agricultural land purchases or not. If it does, a €1m farm today will cost the buyer €60,000 in Stamp Duty, €40,000 more than it would have yesterday!

A move to exclude farmland from the definition of commercial property could solve the problem as would criteria to ensure that land is kept in farming for a certain amount of years. But it’s a poor reflection that the two key Departments for most farmers – Agriculture and Finance allowed such an oversight to happen.

So, while the Minister for Finance Paschal Donohoe has approved an extra €64m for the Department of Agriculture, when farmers look behind the top-line figures many will feel that they have been forgotten as left very exposed to the cold reality of Brexit as it hurtles down the tracks.

Online Editors