What's coming up for the agriculture sector in 2024?

At this time of year I often take the opportunity to look back at the past 12 months and look forward to the year ahead. In looking back on 2023, where do we start?

I guess it will be remembered as the year of the cost of living crisis, where inflation continued to rear its head and as a result the Bank of England continued to push up base interest rates, for the first half of the year at least, despite the fragile state of the economy.

Thankfully the long and deep recession predicted by many commentators this time last year has not materialised yet, inflation seems to be on the way down and the pressure to increase interest rates further seems to have eased, which are both hopefully positive indicators as we enter 2024.

However, it must be remembered that many of the Millennial generation have never experienced interest rates above 1%. The full impact of rate rises will continue to be felt well into 2024 and beyond when fixed rate borrowing arrangements come to an end – longer fixes and hindsight being a wonderful thing for us all!

In general, whilst input prices for the likes of fertiliser and associated products have come back from the scary height of mid-2022, they remain historically high and, with falling output prices in many sectors of the industry and supermarket pressures to reduce food inflation, current trading conditions for many are difficult. This is particularly the case for the combinable crops or dairy sector, where the halcyon days of receiving over 50 pence per litre seem light years ago.

Hopefully not all of the reserves earned in what for many was a very profitable, if not record, year for 2022/23 have been spent and some were invested in the future and for the January 2024 tax bill. This is just further evidence of how quickly things can change in the sector where much remains beyond the farmer’s control.

As we enter 2024, one thing clear is that it promises to be quite a year politically, with the US elections in November and in all likelihood a General Election in the UK, probably around the same time.

As the date gets closer it is becoming more apparent that Sir Keir Starmer’s Labour Party have made great strides since the Jeremy Corbyn days and are now widely considered as an electable alternative.

The bookmakers currently have the Labour Party at 2/7 to form a majority government at the next General Election and, whilst a week is a long time in politics, the bookies don’t tend to get things wrong. Perhaps more concerning is the fact that they have Donald Trump as favourite to be re-elected US President!

We will look at the manifestos of all the major parties to assess their plans for agriculture and the rural economy, and like everyone we shall wait and see. Personally I still feel that the way in which Scotland and the traditionally Conservative rural seats, such as those in the South West, vote will be critical in the overall result.

Clearly important to us is the stance of all political parties with regards to Inheritance Tax (IHT). Some were predicting changes to IHT in the Autumn Statement that did not happen, but it has been suggested that will be considered in the 2024 Spring Budget. Whilst as a headline the abolition of IHT might appear good news to me, this is only part of the story. The agricultural industry benefits from some significant IHT reliefs and through sensible and timely planning IHT can often be mitigated.

On the basis that the removal of IHT would result in other changes to general tax legislation – whether that be significant Capital Gains Tax changes, Capital Transfer Tax, some kind of Lifetime Receipts Tax or Wealth Tax – then as is often the case the devil will be in the detail and potentially the overall implications on the agricultural sector might be far from desirable. I guess people need to be careful what they wish for, and my advice would be that you look to push on with any succession planning as soon as possible whilst we know where you stand.

In terms of policy, at the time of writing this article, we are expecting a major announcement on Environmental Land Management to cover additional Sustainable Farming Incentives (SFI) standards for 2024, as well as details of the “new” Countryside Stewardship scheme which will be introduced for 2024. This announcement was expected in the Autumn but with the recent change in DEFRA Secretary of State could well be further delayed. When it is announced, I suggest this should be essential reading for farmers and their advisers to consider the alternatives available to them to help replace the lost Basic Payment Scheme income, which is now beginning to bite.

In my opinion it remains essential that these funds are taken up by farmers, as if not there is a huge risk that farmers are seen as disinterested, with undrawn funds being redirected elsewhere.

At the same time, DEFRA continue to announce a varied selection of grants that should be of interest to many. I have written a piece on this that can be found here.

In addition to public sector environmental land management schemes, we are also seeing growing interest in private sector schemes, such as Biodiversity Net Gain and others regarding nutrient neutrality and carbon markets.

Whilst some have described this as a little like the Wild West at present, I believe these certainly merit consideration, as for some these could present a great opportunity and be lucrative. A continued stumbling block for some remains the tax treatment, both income and capital taxes, of such schemes and the general uncertainly surrounding the position here.

We, along with many other agricultural institutions, responded to HMRC’s consultation and call for evidence regarding taxation of Environmental Land Management in Spring 2022. As such, it is disappointing that no further responses or announcements on this will be released until the Spring Budget at the earliest, so the uncertainty continues, which makes our jobs as advisers very difficult.

As I get older it becomes apparent that in terms of advising the agricultural sector there is no end game. Whether we are talking personally or at a business level, in every year there will be changes and challenges that we will face up to, as well as opportunities which we will look to take best advantage of, albeit at times it seems that these are harder to find.

Here’s to the challenges and opportunities that 2024 will have to bring to us all and I remain confident in the resilience of the British farming community to cope with them.

Wishing you all a Merry Christmas and a happy and prosperous New Year.