TRIG Working Group Meeting Structural Change Facilitating New Entrants and Exits

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1 TRIG Working Group Meeting Structural Change Facilitating New Entrants and Exits Working Group Members Mike Holland (ALA), Andrew Shirley (CLA), Jonny Alford (County Council Farms), Chris Cardell (NFU), James Dennis (Savills), James Grey (TFA), Eleanor Griggs (NFU), Rebecca Heal (NFYFC/Savills), Jeremy Moody (CAAV), Alison Rickett (FSLEC). Papers circulated prior to the meeting from the Addington Fund, Professor Matt Lobley, Princes Countryside Fund, St Georges Consultations. For ease of dealing with the target areas, discussions were split into two parts. General comments for consideration It is a well-established fact that the average age of farmers has been rising and so although this section is devoted to the new entrant starting in business, they will be inextricably linked to those looking for new farming models and ways of working especially if considering succession. The TRIG sub group also raised concern that not only should we consider entry points and exits from farming but that we must make the necessary moves to find the farms and land that people can move onto once they are established and look to grow their business PART 1: New Entrants Definition of New Entrant for purposes of this discussion The group decided that the term new entrant would cover the following: Anyone of any age looking to start up in farming business either on their own or in a range of various legal agreements where they work with an existing business/person. PRIORITY RECOMMENDATIONS FROM THE GROUP 1 Open up and find new ways/business models of accessing land for new entrants such as joint ventures 2 Government and industry support/financing for the further development of the National Land Partnerships Service so it can provide a fully funded service to the farming community to match joint ventures and farming business opportunities. This will benefit not only new entrants but landowners and is a complementary tool for succession. 3 Creation of a business guarantee loan scheme to help new entrants to get started. Not a grant but a loan so it can be built into business plans to be repaid. 4 Clarification and consideration around taxation and APR for those looking to work with new entrants and help new businesses. 5 Financial support and help to ensure business skills for new entrants are available and reaching required standards. Also, the need for additional KT for land owners and related land professionals to ensure as many as possible options for land use and agreements are being offered.

2 Observations from group discussions 1.Availability of Land (and Buildings) The group discussed that new entrants are likely to struggle to be able to purchase land unless it was inherited. The tenancy market is also changing as more AHA s come to conclusion and FBT s take their place. It was acknowledged that there are land and businesses opportunities out there for new entrants but we need to change the way and mindset in which this is undertaken by the new entrants, land owners and supporting professionals. We could also be proactive to generate more. Tenancies will obviously be a key deliverer in this area but FBT s do have flex within their structure and is this being maximised currently? Joint ventures could provide a real set of alternatives ways of working which not only benefit the new entrant but also the land owner, spreading or reducing risk factors, accessing more land, sharing skills and knowledge and providing routes to step change businesses wishing to develop/expand and those considering succession issues and planning. More work needs to be done in this area and support given to organisations working with this. It was agreed it was currently easier to enter as a new entrant with a livestock enterprise as this could start on a very small scale and could often utilise smaller areas of grazing land and can be operated on lower inputs and capital. Horticulture could be another option. Arable models such as contracting are established but could be added to. How can the routes of access be improved? Land opportunities with use of buildings was far more difficult. Correct infrastructure could also be hard to find for new start-up businesses. Will land owners be prepared to invest in this? Land Value Versus Productivity we have seen 30+ years of land occupancy and value being separated from its land use and capacity to be productive. This needs to revisited and considered in any future schemes. Are starter farms the answer? Or work with a far more robust approach across the board of supporting good business models and sustainable practices? If new entrants could fulfil the business criteria they should be treated equally in applications. In the past, there has appeared to be a lack of willingness to move to a land opportunity out of the new entrant s local area. Whilst this will remain the case for some especially with family commitments and considerations, there is now some evidence* that people are more willing to move if the right land opportunity came along (*Land Partnerships Service). Working with new entrants on part time/small scale ventures often allows them to gain the experience and some capital to put into a tenancy application later. Landowners working this way often then have high quality applicants from people they know already if they have been operating in this way, reducing risk factors. Larger land owners often considered as the main source of land for letting. What would attract smaller private landowners to consider this or other business models to encourage new entrants? 2. Figures on new entrants Good detailed figures on the number of new entrants looking to start up in agri business appear to be limited. Often figures are focused more on those needed as a whole in all parts of the industry rather than just on farming business. The group felt there was an opportunity here to perhaps look at some research to gain some ideas of how many really want to start up in business and their background farming/non-farming. This could then be linked with the current support available and what is being requested.

3 3. Finance include BPS The group was uncertain as to how much take up of the young farmers scheme under current funding had been? BPS for current new entrants is mixed. Some are entitled to it under their legal agreements, others are having to operate without access to this and the landowner takes the payment. The group felt this needs further investigation as some are looking more for good and fair market prices and don t wish to rely on subsidies so much whilst others (region/enterprise dependant) would fail to continue without such payments. There needs to greater consideration on availability of finance through start up loans rather than necessarily via grants for new entrants. This could have quite an impact on business growth A guarantee loan scheme (lower interest rates) could be the way to move forwards and considered by new entrants as a real starting point and not as a last resort. It should also be considered for those moving onto a larger holding. Consider financial support and advice for setting up of Joint Ventures to both parties. Need to work with banks/financial bodies to look at how new entrants in particular can be helped to build up a business portfolio which will help them when applying for business finance. Many do not realise how important this is even if they have been operating on small scale or part time basis. Myth busting around APR and farming business is required. 3. Business Knowledge Business knowledge still needs to improve especially in a rapidly changing agricultural market. Lack of understanding on agreement types and how they can be interpreted by new entrants. Land owners and supporting professionals not always fully aware of all the options and how they may be able to bring them into established business. Often reverting to what is already known to have worked. Training need here has been highlighted. Accessibility to business training for new entrants needs to be continued. 4. Uptake of other business models such as joint ventures So far, uptake of joint ventures is slow. This is due to lack of understanding of these business models by all parties: new entrants, landowners and supporting professionals. Better use of case studies and supporting information required. Joint ventures can help improve availability of land be a very useful tool in succession Need a central service to help provide information and matching of land and business opportunities and those looking to start up. E.g Land Partnerships Service? Land use opportunities should start with the commercial aspects and then work back to a suitable agreement type. 5. Accessing tenancies more easily The group s consensus is that the quality of applicants applying for tenancies has improved in the last few years, with often very high calibre applicants losing out just because there are not enough tenancies to go around. This may have been helped with bespoke tenancy training modules from industry organisations, and a greater emphasis on business skills needed alongside technical skills.

4 The high number of people seeking tenancies could be contributed to as it is often viewed as the only route to get into farming, where land cannot be purchased. Many are totally unaware of the array of legal agreement types and options of other business models which could be of use to them. Is there a more inclusive way to advertise tenancies? A great deal of tenanted land is simply re let to neighbours and existing tenants and does not come onto the tenancy market 6. Marketing Marketing of land opportunities needs to be improved We need to stimulate as many opportunities as possible The market should be open and flexible. New Entrants Recommendations 1. Open up the (non-purchasing) land market and bring in a much wider access to land through different routes and by using a whole array of business models and agreements. 2. New entrants need suitable business skills to apply for land opportunities on an equal footing. Provide training and/support to help them reach their potential. 3. Ensure advice sought from trusted advisers in these areas and use case studies to highlight various ways of accessing land. 4. Training requirement/knowledge sharing for new entrants, landowners and professionals on joint ventures and use of established agreement types in innovative business models. Various organisations could contribute to this. 5. National Support required for the Land Partnerships Service (England), to develop and widen its matching service, signposting and knowledge transfer over the transition period of Brexit so it is fully delivering and providing an established service post Brexit. 6. Consider a business guarantee loan scheme for new entrants and those moving on to the next stage in farming business. 7. Clarity on taxation and APR considerations for landowners and agreements working with new entrants. 8. Possible research on the number of new entrants looking for land and business opportunities. Review up take and lessons learnt of previous funding schemes for new entrants. 9. Potential to link new entrants scheme with those looking to exit the industry. Requires development and could be considered in future funding development.

5 PART 2 - Exiting Farming Retirement/Succession PRIORITY RECOMMENDATIONS FROM THE GROUP 1 Work on taxation around retirement required on IHT and APR. This should be linked to the detailed recommendations from the other TRIG working groups in these areas. 2 Creation of a retirement outgoers scheme. Information and advice provided through a central delivery system/hub. Could provide support with pension planning, housing and family considerations. Could also consider financing free succession surgeries to help start the process and discussions. 3 Review of planning regulations required around the conversion and building of new properties for retiring farmers. 4 Support for housing organisations such as Addington Fund, to provide help to more farmers and be seen a real solution and route to retire with dignity. 5 Improving knowledge and access to other alternatives in land management models in considering succession plans such as joint ventures. Financial support considered if a retiring farmer looks to work with such a venture as part of a retirement plan. 6 Further training of industry professionals on how to work with succession/retirement planning and training of bespoke retirement advisors/facilitators to work particularly with farmers and their families to discuss options at an earlier stage. 1.Finance debt, taxation issues Taxation Nil rate on IHT/uncertainty on APR rates. APR on retirement housing needs to be discussed. Income Tax relief on let land is a real help with retirement planning. Greater understanding of management of diversified businesses and future resilience is required. Farming tenant s entrepreneur s relief is an issue. Intra family management of a business is harder CAAV currently undertaking work in this area in Ireland. Need for farmers to realise and tackle debt issues earlier on. Debt soon gets out of control. Banks do they feed debt accumulation? Smaller farming units often have more problems to deal with when considering retirement too poor to stay and too poor to go. Tenants/tenancies can often lead to an accumulation of too little capital to keep going. Outside factors such as animal diseases e.g. TB and Foot and Mouth can often have a huge impact on retirement funds and planning. Debt can drive opportunity. How flexible would landlords be to other agreement models/ways of working to help establish a retirement plan?

6 2. Housing issues Tenants who buy a house for their retirement whilst still farming have the added constraint to coming under buy to let regulations which is hitting them whilst planning for their future. Planning issues for retirement properties to be built, needs to be addressed and conversion of existing farm buildings to dwellings for retirement. Tenanted sector landowner to help find a retirement house on their land or locally? Do they allow them to stay or send them to the nearest housing officer as retirement heads towards their tenants? Should we be asking housing authorities to look at retiring farmers under a Gold banding. In that even though they are not technically homeless when they apply they know they can put the application in with a reference to the completion of tenancy date. Planning regulations for new builds for retiring farmers is not easy. System needs review. Planning assessment housing for retirement needs to be considered as essential not desirable Need to make better use of and give more support to farming housing organisations such as Addington. They are often seen as the last resort along with council housing. Could housing subject to agricultural tie and social housing be considered by organisations such as Addington once they become available rather than sold otherwise? 3. Cultural Are those in debt too proud to ask for help? How do we get the industry to accept that retiring is not a failure? Farmers often want to stay close by to their farm business or local village, not move miles away to find affordable housing and be in a very unfamiliar environment. They can offer a wide skills and knowledge base to pass onto new farmers. But somehow need to ensure the ones who do decide to mentor or remain as an adviser to a business are giving good, sound advice. These farmers could be a valuable resource in a range of established mentoring schemes. Encourage actively for succession planning to be brought into business planning much earlier on in farmers career. What are the options for succession short of give up or sell up? A real opportunity here to consider joint ventures to help where there is no successor, or where family do not wish to farm themselves or to sell the farm asset. This often provides additional assistance in the form of practical help and maintaining a business with new ideas and inputs as well as building on years of devotion and hard work of the farmer and their family. Need to highlight routes to retirement with dignity. 4. Knowledge of retirement options/ pensions/planning/joint ventures Farmers looking for guidance on who to go to seek advice for retirement planning. Consider a central source of information to help for retirement planning. Should there be auto enrolment for pensions for farmers? Do TFA and Landowners help with this and finding how the scheme could be contributed to? Should landowners have obligations to provide information and help their tenants prepare for retirement? Potential greater use of specially trained industry facilitators/advisors who specialise on succession and retirement.

7 5. Bespoke retirement scheme The group discussed that a Retirement Outgoers Scheme would be of more use than a scheme to buy out farmers to help them retire. Such a scheme should include better tax breaks, signposting and information provision on all areas around retirement. Joint working group would be required. Such a scheme should be linked to a national campaign rolled out through all farming organisations and across the industry. It must have very positive messages with ideas, solutions and advice already lined up to deliver once the campaign is launched. Recommendations for Retirement/Exiting the industry 1. Work on taxation around retirement required on IHT and APR. This should be linked to the detailed recommendations from the other TRIG working groups in these areas. 2. Government to consider a retirement package for farmers including financial relief in some areas. 3. Earlier recognition of debt problems by financial institutions/banks/accountants and help to discuss these before these before they lead to greater issues. 4. More flexibility with land owners and farming agreements to help deal with retirement planning. 5. Bring in information on retirement and succession planning much earlier on. Target the younger age groups to ensure it becomes part of their long-term planning. 6. Review required on planning assessment and regulations for conversion and new builds. 7. Help landowners consider the options they could provide for retiring tenants. 8. Pension planning needs to become a necessary requirement for farmers/auto enrolment. 9. Provide better housing options with organisations such as Addington. Find ways to work with them, remove stigma and for it to become a positive way to help farmers in retirement/exiting and not it being the last option. 10. To find a way for farmers and their partners to still feel valued when they step down and where possible remain part of their local community if that is their requirement. 11. Offer a variety of ways and routes for farmers to consider stepping back slowly and retiring. Joint ventures could be a useful tool here. 12. Look to provide a central hub of information and support for farmers retiring. 13. Improved training and provision of specialist retirement advisers. 14. Creation of a national Retirement Outgoers Scheme along with a national industry wide support group and a national campaign to get people involved. Working title suggested Let s Talk. Any scheme created needs to be easy to access and use.