Anand Dossa is an NFU economist.
“We need to see investment at home matched by exports abroad. If Britain wants to produce more, it needs to invest more.” These were the words from the Chancellor George Osborne in his Summer Budget last week.
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And when it comes to investment the Chancellor has once again listened to British farmers and the NFU, in the same way that the he responded to NFU calls to introduce five year tax averaging for the farming sector in his March Budget.
Mr Osborne has set the Annual Investment Allowance (AIA) at £200,000 for the length of the parliament. This gives stability to investment in the agriculture sector, allowing farmers to forward plan with confidence. This was a key NFU manifesto ask and part of our submission to the Chancellor ahead of the new government’s first Budget.
Mr Osborne’s AIA announcement will certainly help address worries over spending on plant and machinery
Agriculture is a capital hungry sector and farm businesses want to plan long term investment cycles. The previously fluctuating AIA made investment planning difficult for farmers, with worries over tax levels and cash flows. Making investment decisions for the long term - in buildings, in on-farm infrastructure and against a backdrop of increased volatility – is a constant challenge for farmers, but Mr Osborne’s AIA announcement will certainly help address worries over spending on plant and machinery.
However, the NFU would have liked the Chancellor’s approach to investment to have gone further. Unfortunately the new AIA does not cover everything that we called for. Buildings and fixed structures, such as reservoirs do not qualify for the AIA relief. This is irrespective whether they are a necessary part of the investment for growing the farming business. In our pre budget submission we called on the Chancellor to include wasting assets such as these within the scope of the AIA relief.
The case for promoting farm investment is strong. Our self-sufficiency in products for which the UK has a natural competitive advantage is slipping. Much needed increased productivity has stagnated in recent decades. We need government to keep listening to British farmers and support growth policies that send the right business signals to farmers across the UK.
Through the work of our policy, food and farming, regional and political teams we will make sure that happens.
The Budget contained a number of announcements which will impact on farm businesses. You can read our NFU member briefing by clicking on the link below (you will need to log-in first).