PCW0028

Written evidence submitted by the Farmers’ Union of Wales

About the FUW

The Farmers’ Union of Wales (FUW) was established in 1955 to exclusively represent the interests of farmers in Wales. Since 1978 the union has been formally recognised by UK Governments, and subsequently by Welsh Governments, as independently representing those interests.

The FUW’s Vision is thriving, sustainable, family farms in Wales, while the Mission of the Union is To advance and protect Wales’ family farms, both nationally and individually, in order to fulfil the Union’s vision.

In addition to its Head Office, which has thirty full-time members of staff, the FUW Group has around 80 members of staff based in twelve regional offices around Wales providing a broad range of services for members.

The FUW is a democratic organisation, with policies being formulated following consultation with its twelve County Executive Committees and eleven Standing Committees.

Challenges facing family farms and farming communities

1.                  Agriculture plays a significant role in the Welsh economy, employing a higher percentage of the workforce in Wales than in other parts of the UK. In Wales, 1.8% of the national workforce were employed in agriculture, forestry or fishing in March 2022. This is a greater proportion than in England (0.8%) and Scotland (1.6%), but lower than Northern Ireland (3%). There are also large variations by counties in Wales with Ceredigion and Powys having approximately 12% of the workforce in agriculture while Cardiff and Bridgend have below 1%.

2.                  In Wales, between 2010 and 2017, the average age of farmers rose from 56 to 59 years and the proportion of farmers under the age of 45 in Wales also fell from 14% to under 10% between 2010 and 2017. The average age of Welsh farmers is now over 60 with just 3 percent of farmers under the age of 35.

3.                  The number of people in Wales involved in farming has gradually decreased over the past 10 years with a reduction of 14% between 2011 and 2021 (Figure 1). There is a correlation between a reduction of people employed in agriculture between 2011 and 2021 and the lower populations in rural areas such as Ceredigion and Gwynedd

reported between 2011 and 2021 due to the higher proportion of people employed in agriculture in these counties compared to other areas of Wales.

Figure 1 : Labour engaged on agricultural holdings 2011-2021 (Welsh Government Farming Facts and Figures 2021)

4.                  The most significant single challenge facing family farms relates to low farm incomes, which have a knock on impact on the wider rural economy and social problems such as the loss of young people from rural communities: Whilst fluctuations have occurred over the past decade, particularly in the dairy industry, there continues to be a general downward trend in farm business income in real terms (Figure 2).

Figure 2: Average farm incomes 2012-2022 for all farm types (Farm Business Survey)

5.                  Family farms nevertheless continue to play a key role in sustaining rural economies, employment and society, and this occurs as a direct result of those families undertaking agricultural activities which support secondary and tertiary businesses in the wider economy.

6.                  Farm inputs (i.e. expenditure) are a clear measure of such contributions, and while farm profitability is generally low, the scale of farm inputs highlights this contribution (Figure 3).

Figure 3: Welsh farm business income (i.e. business outputs less business inputs) and input costs, 2020-21

7.                  While farm incomes remain low, in the absence of direct support they would be far lower or negative, representing a major threat to their very existence (Figure 4).

Figure 4: Components of Welsh farm business income, 2020-21

8.                  The reliance of Less Favoured Area (LFA) farms on direct support is particularly significant. This designation is given to regions where production conditions are more difficult, such as those where land, climatic and cultivation conditions are poor. In Wales, 80% of the total agricultural land in Wales is designated as LFA and as such covers the vast majority of rural Wales.

9.                  LFA farms also have a higher proportion of income from agri-environment schemes and therefore the loss of the Glastir Scheme from 2024 will add to financial pressures on all farms and in particular LFA farms.

10.              The particular reliance on direct support (BPS) is not surprising, given agricultural support policies currently in place in Wales are the latest incarnation of UK, EEC and EU policies introduced more than 60 years ago specifically aimed at reducing food prices for consumers without threatening farm incomes and food production.

11.              In the absence of increases in farmgate prices (which would have to come from either significant increases in the percentage of consumer costs passed up the supply chain, or an increase in food prices) the loss of some/all direct support represents an existential threat to Welsh family farms.

12.              It is therefore important to draw the Committee's attention to developments in England, where future agricultural support policies very similar to those proposed to be introduced in Wales in 2024 are already being implemented.

13.              For example, accountancy firm Douglas Home and Co, which serves more than 1,000 rural businesses, stated “Our estimate is that at least 50% of farmers could see their profit wiped out [as a result of the loss of direct support]. While most may break even, many will be running at a loss once the subsidies are cut. That is a horrifying prospect.”

14.              Furthermore, a report commissioned by the Great South West partnership and published by the University of Gloucester's Countryside and Community Research Institute (CCRI), ‘Assessing the impact of Agricultural Transition in Cornwall & the Isles of Scilly, Devon, Dorset and Somerset’ looked at the impacts and opportunities of the current English agricultural transition policy on farmers, land managers and the wider rural community.

15.              The research found that over the English transition period a total of £884 million in direct agricultural support will be lost by farmers in the area by the end of 2027.

16.              Assuming that 25 - 50% of the £884 million of BPS that is lost was previously spent on businesses supporting the farming sector, the loss represents a hit of £220 - 440 million lost in the next 5 years for feed merchants, machinery retailers, contractors, vets, solicitors and many other tertiary businesses that rely on agriculture.

17.              Trade deals which allow the importation of cheap food produced to lower standards than those required of Welsh farmers will reduce domestic farmgate prices and increase reliance on the direct support that is currently destined to be phased out in Wales.

18.              Amongst the costs faced by farmers are the numerous regulations in place, and plans to increase such costs through the introduction of additional restrictions and regulations which are not in place in other countries represent an additional threat to Wales’ family farms.

19.              Most prominent amongst an array of such additional costs is The Water Resources

(Control of Agricultural Pollution) (Wales) Regulations 2021, which the Welsh Government’s Regulatory Impact Assessment (RIA) acknowledges will cost Welsh farmers as much as £360 million in infrastructure costs alone - around £100 million more than the Total Income from Farming in Wales in 2019[1].

20.              This figure is likely to be closer to £450 million if current inflation rates of around 25% for building materials are taken into account.

21.              A major and growing challenge facing family farms and rural communities is the competition for rural homes and land from individuals and businesses outside Wales which places both beyond the financial reach of most Welsh families and has an adverse impact on communities and culture.

22.              Dominating concerns over land acquisition is the rise in the purchasing of land for tree planting/carbon offsetting by individuals from outside Wales.

23.              Between November 2019 and March 2020 the proportion of land accepted for the Welsh Government’s Glastir Woodland Creation grant following applications from outside Wales rose from 10% to 16%, while the average area of Wales planted under the scheme by bodies from outside Wales during the 2020-21 planting season was 97 hectares - five times higher than the average.

24.              Such concerns and challenges are compounded by the ongoing impacts of Brexit, the conflict in Ukraine and other factors, including:

a.      Worker shortages in the food supply chain and veterinary practices

b.      Major rises in input costs, including fuel, energy, fertiliser, feed and building materials

c.      Non tariff barriers for exports to the EU which contrast with the UK

Government’s failure to introduce equivalent checks for imports of agricultural products from the continent

Practical steps Governments should take

25.              Critical to the survival of Welsh family farms and the economic, environmental, social and cultural contribution they make to Welsh communities is their economic viability. This is vital to encourage young people to enter or stay within the industry while also supporting the ancillary industries to agriculture.

26.              The FUW has long maintained that the economic viability of Welsh family farms must be at the heart of any future agricultural policies.

27.              However, the 2021 UK budget and spending review revealed that an average of £300 million a year would be allocated to Wales for agriculture and rural development (i.e.

replacement BPS and RDP funding) over the next three financial years (up to 2025).

28.              This is £37 million less than the budget allocated in 2019 - a year in which the

Conservative manifesto pledged to "guarantee the current annual [Common

Agricultural Policy (CAP)] budget to farmers in every year of the next Parliament.”

29.              This means that Welsh agriculture and rural development will have received over £200 million less by 2025 than it would have had the 2019 budget been fixed.

30.              While the Minister for Rural Affairs and North Wales, and Trefnydd, Lesley Griffiths’ announcement to maintain the total budget of £238 million for direct payments in 2023 and 2024 was welcomed, it must be noted that it represents a significant real terms fall for Welsh farms given the current rate of inflation.

31.              The impact of such cuts in funding for rural affairs by the UK and Welsh Governments is a concern given the additional economic, social, cultural and environmental benefits that come from such funding.

32.              Given that, on average, 80% of farm business income comes from direct BPS payments, the continued provision of such direct economic support at at least current rates will likely grow in importance as adverse impacts from the Covid-19 pandemic, Brexit trade barriers, the war in Ukraine and liberal trade deals with Australia, New Zealand are further realised.

33.              It is also essential that the BPS and RDP budget in its entirety is increased in line with inflation wherever possible given the increased allocation of total funding for Wales from the UK Treasury.

34.              The UK and Welsh Governments must also recognise the dangers to UK farming and food security of liberal trade deals with major agricultural exporters.

35.              Where trade deals do offer new opportunities for Welsh farmers it is essential that the UK and Welsh Governments work together to open up such markets, by supporting promotion, ensuring best use of diplomatic channels and addressing practical barriers such as paperwork that may hinder market access irrespective of what has been agreed in principle.

36.              The UK and Welsh Governments should also work together to seek to manage the property and carbon markets in a way which addresses the major and growing problems for rural and farming communities caused by second home and similar types of household purchasing and the buying up of vast areas of Welsh land to plant trees - problems that are also present in England and other parts of the UK.

37.              This should include the use of the planning system, either to make it compulsory to require planning permission to plant an area of woodland and change the use of agricultural land[2], or remove the barriers farmers continue to face when attempting to renovate farm outbuildings into residential properties for their children or relatives, in turn keeping local people in their local communities and retaining the cultural heritage of Welsh farming families.

38.              Support for new and young entrants is currently lacking in Wales. To encourage young farmers to continue or start farming in Wales will depend on the economic viability of funding the initial capital costs. Support in the form of loans and grants for (capital) purchase and improvements such as land management or environmental sustainability are needed.

39.              The European Union (EU) Common Agricultural Policy 2023-2027 provides for several interventions specifically for young farmers. EU countries must dedicate an amount corresponding to at least 3% of their direct payments budget to support young farmers. This support may be granted as income support, investment support or start-up aid for young farmers. There is also a voluntary scheme under direct payments providing enhanced income support to young farmers who are newly set up for the first time and who are entitled to basic income support. The support is granted in the form of an annual payment per eligible hectare or annual lump sum.

27 September 2023