Budget gives timely relief after a hard year on farms

Following the Budget announcement, IFA’s work now is to see the measures implemented in ways that work for farmers.

Without question, the low-cost loan scheme of €150m was the standout feature.

It’s an example of the political system responding positively to IFA’s campaign on farm income over the last six months.

Last week’s Budget also contains significant measures on increased funding for farm schemes, the reversal of cuts to Farm Assist and flexibility on income averaging to help deal with price volatility.

2016 has been a very difficult year for farm families with low commodity prices, poor weather conditions and the impact of the Brexit decision.

The introduction of a new €150m agri cashflow support loan fund, at an interest rate of 2.95%, will be available to farmers across the board.

This is a mould breaker for the farming sector. It addresses the key issue around what is a crucial input cost for farm families.

Farming is capital intensive, with farmers investing annually in buildings, machinery and stock.

This is financed out of own resources and borrowing. With average farm income of around €25,000, of course it’s a challenge to meet repayments.

IFA has pushed very hard for low-cost credit because cashflow pressure on farms in 2016 is real.

The lack of competition and flexibility within the Irish banking sector is preventing farmers from securing finance at a reasonable cost.

This is at a time of historically low interest rates. Analysis by the Central Bank shows rates for farmers and other SMEs are 2% above the EU average.

Merchant credit is expensive and inefficient, not just for the farmer, but for the merchant or cooperative which have extended it. The bank overdraft rate of 8% is uncompetitive.

Farmers have a strong repayment record. They need access to both short and long-term credit at a more competitive rate and this new loan scheme will provide it.

The new flexibility under income averaging, to be introduced for the current year, will allow farmers to ‘step out’ in an exceptional year. This will help farmers to manage the very difficult cashflow situation on farms this year.

Based on IFA’s proposal for a measure to tackle income volatility utilising the existing income averaging system, the opt-out facility will allow farmers to pay their tax on the basis of actual income instead of the average income.

The additional liability is then paid over the following four years. This measure will be available for the current year’s tax return.

IFA believes the measure could be enhanced to give further flexibility, recognising that a severe income drop can happen in more than one year. Our next step will be to put specific proposals to the Department of Finance.

The €107m increase in funding of farm schemes under the Rural Development Programme (RDP) is important for investment and supporting low-income farmers. It brings overall funding to over €600m for 2017.

In particular, the €69m increase for GLAS to €211m will allow 50,000 farmers into the scheme next year.

The new €25m sheep welfare scheme will be a significant measure for sheep farmers and the re-opening of the Beef Genomics Programme, with funding of €52m for next year, will continue to support our national suckler herd.

The Government must build on these schemes to reach the €250m target for GLAS set out in the RDP and keep improving suckler and sheep supports. Funding of €50m for TAMS, €111.6m for forestry as well as €5m for horticulture have also been confirmed.

The complete reversal of cuts to Farm Assist, along with the €5 per week increase, and the provision of 500 extra places under the Rural Social Scheme recognises the unfairness of the changes in the first place.

Both are vital supports for low-income farm families, and these changes will open up the scheme to more low income farmers and increase the support for those who are already receive Farm Assist.

If there were some downsides, the decision not to start the restoration of ANC funding in 2017, given the difficult income situation, was disappointing. We will also be pushing strongly to get the Earned Income Credit up to €1,650.

A number of export-dependent sectors, such as the mushroom sector, have been very negatively hit by the depreciation of sterling in the wake of the Brexit vote.

Specific measures to provide immediate support to these sectors must be brought forward by Government immediately.