The incentive to maximise productive use of land is all but gone

IFA’s pre-budget submission to the Department of Finance focuses on supporting farmers through “unprecedented challenges”.

The incentive to maximise productive use of land is all but gone

By Kieran Coughlan

IFA’s pre-budget submission to the Department of Finance focuses on supporting farmers through “unprecedented challenges”.

Key priorities suggested include a €200 suckler cow payment, a €5 ewe payment, increased payments for Areas of Natural Constraint, €250m for agri-environmental schemes, and a low

interest loan scheme.

On the tax side, the wish list includes an increased earned income credit, broadening of income averaging, and a new farm deposit scheme.

Perhaps the most interesting data within the report is a diagrammatical representation of average Irish farm income compared to EU counterparts, in terms of underlying farm profit and the amount of CAP support

offered in each country. The graph (right) shows that average farm incomes earned by farmers in 26 of 28 EU member states are substantially below the incomes available to other full-time workers in their

respective economies, even after CAP support is included.

There is very little solace in telling an Irish farmer it’s OK to be working for a pittance, because your fellow EU farmers are in the same position. But the underlying position is that farm incomes are significantly below those earned by other workers in the economy.

This isn’t new, for four decades, Irish farm incomes have always been significantly below those earned in other sectors of the economy, typically in the range of 50-65%

Meanwhile, our number of farm holdings almost halved from 240,000 to 140,000 today.

However, there has been stability in the number of holdings since the late 1990s — which masks another underlying trend, of the number of farm households benefiting from an extra income sources earned by one or both spouses has increased significantly.

Separately, decoupling of farm payments means many farm owners can continue to farm and own land into their retirement, on an extensive rather than intensive basis.

A third factor is that farmers became entitled to contributory pensions from the mid 1990s onwards, due to a roll-out of PRSI to farmers in the late 1980s.

Historically, there was a higher turnaround of farms, where older farmers, no longer able to farm at full capacity, either sold or transferred their holdings, so they could then access the state non-contributory pension.

If the trend of the last 20 or so years continues, we will see an ever-increasing number of part time farmers.

The incentive to maximise productive use of land is all but gone, with CAP payments decoupled, and intensification penalised by nitrates regulations, or by inability to

access GLAS or an equivalent scheme. The future of the full-time farmer becomes more precarious, as hobby farmers and farmers with off-farm income can better compete for land, either to rent or to buy, with the added surety of off-farm income.

Ironically, non-farmers are financially better positioned to buy land, with higher off-farm incomes compared to those who perhaps need it most. The direction and trends of the past two decades in particular show how policies in Ireland and in the EU prevented reduction in farm holdings, but on the flip side, the average underlying farm profit for the majority, excluding CAP subsidies, is paltry, and the prospect for full-time farmers to grow their farm businesses to a

degree where they can compete internationally an d retain a decent standard of living is undermined.

Much fanfare is made about encouraging new

entrants into farming, and

undoubtedly new blood is required to replace our

increasingly elderly farming population.

So what does all that mean for the budget process next October? As a policy objective, is it not time to consider rationalisation of the industry, and re-introduction of the early retirement scheme, so that the incomes available to those who remain can be lifted out of subsistence.

Tinkering at the edges of the tax code will not change the trend of the past 40 years.

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