WITH a budget planned for March 11, Mr Sunak will be pedalling hard to get up to speed with his new brief. The TFA has taken the opportunity to propose changes in the taxation environment within which rural landlords make decisions about letting land to encourage longer term Farm Business Tenancies (FBTs).

It has been nearly a quarter of a century since the introduction of the Agricultural Tenancies Act 1995 which ushered in FBTs. The legislation represented a major deregulation of the agricultural let sector and at the time there were great hopes that it would produce an increase in opportunity both for new entrants and those looking to develop existing businesses. Indeed, the stated objectives of the 1995 Act were to improve the efficiency of land use within the agricultural sector whilst increasing opportunities for both progressing farmers and new entrants. Neither of these objectives have been attained. Whilst we saw an increase in the amount of let land through the early years of the new legislation this has, by and large, tailed off. However, the biggest failing of the legislation has been the perpetuation of short lengths of term leading to inefficiency in both environmental and farm business management.

Given that farming is a long-term endeavour requiring significant capital investment, patience, good soil management and the ability to balance profitable years against the bad, there is a legitimate question about why lengths of term are so short. The answer is with much higher demand for land than supply, landlords can offer short terms for high rents at very little risk whilst, at the same, time receiving generous and unconstrained tax benefits. This is a clear demonstration of market failure since those offering opportunities have the power to dictate their terms to an unreasonable extent causing inefficient outcomes. In response to this market failure Government has a responsibility to intervene and it is through manipulation of the taxation system where such intervention would have the biggest, positive impact.

Short-term tenancies are holding back progression, investment and sustainable land use. Farm Business Tenancies have been too short for too long and now is the time for that to change. The TFA believes that average lengths of term on FBTs should be 10 years or more and that the Government should be using fiscal levers to encourage a more sustainable position.

I am hopeful that the new Chancellor will be encouraged by his new Cabinet colleague at DEFRA, George Eustice who said in a recent letter to the TFA: “Moving on to address your concerns about the length of farm tenancy agreements, the Government recognises that farming is a long-term business and I am interested in exploring ways in which we can encourage more landlords to consider longer term tenancies whilst retaining the flexibility that Farm Business Tenancies currently provide ……. I also recognise that the fiscal framework plays an important part in landowner decision-making."