Jason Beedell

Director, Research

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Jason

As is fairly usual, there were few details in Chancellor Philip Hammond’s speech which directly relate to the agricultural sector and rural businesses.

However, there were a number of headline announcements that will have an impact in rural areas. These include:

• A vehicle excise duty rise in April 2018 for new diesel cars which do not meet latest emission standards. The increase will not apply to vans – and we assume other commercial vehicles such as pick-up trucks – but diesel vehicles have long been popular in rural areas, because of their economy, so this measure will have an impact. More positively, a fuel duty rise for petrol and diesel cars scheduled for April 2018 has been scrapped.
• The National Living Wage will rise by 4.4% in April 2018, moving from £7.50/hr to £7.83/hr. It is worth noting that many farmworkers are already paid rates well in excess of the NLW to reflect the high levels of skills and technological knowledge needed in the agricultural sector today. However, the increase will put upwards pressure on cost of labour at a time when farm profitability is still squeezed.
• A commitment that business rate revaluations will be carried out every three years, rather than every five. The chancellor also announced that any rise in business rates will be pegged to the Consumer Price Index measure of inflation, not the higher Retail Price Index, which should also help to dampen down increases in Rateable Values. Both of these measures will be welcomed in the countryside, given rural businesses faced some of the sharpest rises after last year’s round of revaluations. There will also be relief that the VAT threshold for small business will remain at £85,000.
• Mr Hammond announced a package of measures to encourage more house building and to help first-time buyers get on to the housing ladder. The chancellor confirmed his goal of 300,000 new homes being built annually, but indicated these should be focused in in urban areas, rather than on greenbelt land. Mr Hammond also announced a 100% council tax premium to be levied on empty properties, which will affect landowners with rental properties in rural areas.
• Digital connectivity – or the lack of it – continues to be a major problem for many rural businesses so a pledge to spend £500m to support 5G mobile networks, full fibre broadband and artificial intelligence is encouraging. The farming sector will also be watching to see if £2.3bn allocated for investment in research and development offers opportunities to help the industry utilise technology in order to make productivity gains.

Overall, this is a budget which will leave rural businesses feeling that it could have been better - but it could also have been far worse.

However, it is worth noting that it is often in the days following the budget statement that critical details emerge from detailed Treasury documents which end up having the biggest impact.