HIGH COSTS OF FARMING

Press, Volume XCI, Issue 27688, 18 June 1955, Page 5

HIGH COSTS OF FARMING

Taxation May Lead To Waste

MR COLIN CLARK SURVEYS POSITION IN BRITAIN Several points which apply with force to New Zealand farming are made by Mr Colin Clark, director of the Institute of Agricultural Economics, Oxford, in an examination of British farming costs printed in the Jylancnester Guadian” last month. Mr Clark, who is at present in New Zealand, emphasises that high taxation leads to high costs. An awed silence fell upon last December s meeting of the Agricultural Economics Society when Professor Eric Nash, of the University of Wales, and a former civil servant, announced his conclusion that if all subsidies were withdrawn and all British farm produce sold at world prices the farmers net income would not only disappear, but would actually become negative, Mr Clark says. It is of course true that, if we suddenly started importing a greatly increased proportion of our food, world P ri 9 es would probably then turn out to be higher than they are now; but even so the results are alarming enough. The gross proceeds of BritI oo* £&l£H lture (estmiated at £1,336,000,000) would fall by about 30 | per cent, if all produce had to be sold at present world prices. In addition, tne farmer receives about £65,000,000 subsidies on fertilisers, feeding stuffs, etc.

Stern Warnings ? .The Minister of Agriculture has • given farmers stern and repeated warnings that they must reduce their i ~ Labour (now costing £278,000,000, or four times pre-war cost) may soon cost more rather than » less, and we will assume that the - whole expenditure of £289,000,000 on - feeding stuffs and £65,000,000 on fer- ■ tiliser has been necessarily incurred. But it is not easy to justify so high a I figure as £157,000,000, or 16 times pre- • war cost, for fuel, parts and deprecia- , tion of equipment, or the enormous • figure of £189,000,000 for miscellaneous l expenses. I There are grounds for believing that ; the mechanisation of British farming r has been carried to excess, or that r much equipment has been bought i which does not receive sufficient eco- . nomic utilisation to justify its purchase. The farmer (this is a true story), who on a 120-acre farm ran three tractors so as to save himself the i trouble of unhitching his implements . may not be typical; but many such ( cases occur in a less extreme form. To i put it the other way round, whenever . you hear a farmer saying (as you often , do), “I should be all right if I could get a little more land,” this is tanta- ; mount to saying that he cannot get full economic utilisation of his equipment on his present land. No other country approaches our : figure of tractors per 100 acres, even after we have made allowance for tractors required for grassland operations. Germany is the second highest, and there we find a much more ihtensive agriculture, with IOJ units of labour to each 100 acres of arable land, against our 4J. Netherlands agriculture, the most intensive in the world and the most successful in obtaining maximum output from a limited area of land, uses comparatively few tractors and a large number of horses. The United States and Australia do not cultivate as intensively as we do. But our figure of tractors per man is three-quarters that of the United States and Canada, and substantially higher than that of Australia. This surely indicates that there is something wrong. In Sweden, intensity of cultivation, as measured by the amount of labour per 100 acres of arable land, is very similar to ours. But the Swedish farmer used, for a given area, less than half the tractors that the British fa*--mer used, and rather more horses: anc produced enough to pay his labour a* the rate of 3s 9d an hour in 1953, r good deal above the British rate. Prob ably it is just because he did not spenr so much money on equipment and or miscellaneous expenses that he was able to pay his labour better. Danish Fanning Most telling of all are the figures from Denmark. We certainly cannot be patronising about the Danish farmer, the British farmer’s most formidable competitor, who pays wages slighlty higher than ours, with an intensity of cultivation very similar to ours, and uses, on a given area of land, three times as many horses and less than a third as many tractors as does the British farmer.

It is true that several European countries are increasing their stock of tractors very rapidly—Denmark by as much as 25 per cent, year year, Germany 18 per cent., Sweden and the Netherlands about 13 per cent. They had to make a later start than we did, and see the advantage of having mflrc. The British figure is now increasing at the rate of 7 per cent, per annumThis, however, is probably only about enough to replace the loss of farm horses, which is now going on at the rate of nearly 20 per cent, per annum. Tractors, though significant, are only part of the story. Equally startling results are obtained when we make international comparisons of lhe whole range of farmers’ purchases (other than labour, fertilisers, and fodder) in relation to net output (defined as output less fodder and live-stock purchases). When output is measured at world prices, such costs, in most countries, usually come to about 25 per cent, of net ouput, whether we are dealing with peasant rice cultivation in Asia or the highly remunerative agriculture of Denmark or the Antipodes. The proportion stands much higher in Britain and the United States. In Britain, at £346,000,000 out of an output (net of fodder) of £1,047,000,000, these costs appear to be 33 per cent., but are over 50 per cent, when we reckon output at world value; much higher again if we include the maintenance of farm buildings which is not shown in the current official statistics. The American farmer shows a ratio of about 50 per cept., but for this expenditure he gets a much higher product per man than does the British farmer. Merciless Taxation There is one outstanding reason why the British farmers’ costs should be so high. In no other free country is the farmer so mercilessly taxed as is the British farmer. In any other country farmers would vigorously protest. But the National Farmers’ Union remains silent on this subject, presumably because it seeks to form an alliance with the “Welfare State’’ advocates and to present the farmers as one claimant, among others, to a share in the proceeds of taxation. What a short-sighted policy! The economic effects of high -taxation upon the successful business or professional man are serious enough. But they are much more serious in the case of a farmer, whose income is subject to the vagaries of the weather and of the markets. Any prudent farmer must rely on balancing high income in one year against low income in another. But nowadays ne knows that in the good year the Treasury will tax him at the top rate and that (unless he makes a positive loss) he will get nothing back in a year of low income. Under these circumstances it is remarkable that any farmer makes any effort or shows any enterprise at all. Many of them re duce effort and risk to a minimum,

and rest and enjoy life while they can.

By taking careful thought, farmers could cut their expenses considerably. But this will require consideraolemental effort, and why should they make it if the Treasury is going tj take 15s or 20s out of every pound they save If they buy new equipment they can get very high depreciation on it to set against taxable income —in several years recently an initial depreciation of as much as 40 per cent, has been allowed. (It is true that if they get such depreciation now, they*

will get less in later years—but in a few years’ time they may not have so big an income to need offsetting.) In any case, isn’t it better to buy the equipment than to let the Treasury have the money? It may not be much use, but it will save them a little trouble and perhaps ensure them a little more leisure: that is the only think not taxed nowadays. So it goes on. And it is generally the wealthiest and most successful farmers, who have plenty of equipment already, who are tempted to go on buying unnecessary equipment, and often incur expenses which could have been avoided by a little more mental effort. A really substantial reduction in the standard rate of income tax, of surtax, and of death duties would, within a few years, have remarkable effects on the efficiency and costs of farming.

Mr S. C. Scurr, of Ohoka, has recently imported a Wessex Saddleback boar and sow from a leading Australian stud. The pair will be the nucleus of the first stud of the breed to be founded in the South Island on directly imported blood. Wessex Saddlebacks are an important breed in overseas countries, particularly the United Kingdom, where they are regarded as hardy, prolific, and having .specially good mothering abilities.