Tag: news

Farm prices – a novice steps in….

There’s a lot of debate at the moment about the impact of the new imposition of inheritance tax on farms. The new budget proposals from HMG include imposing inheritance tax of 20% on any farm valued above £1m. The Government say it will only effect 500 farms, the NFU says it will be 70,000. That’s quite a big difference.

But nobody seems to be sharing their calculations. Especially Rachel from Accounts.

This is where I can help. Since I know nothing about farming, I’m terrible at growing vegetables and my training in estate taxation economics hasn’t begun yet, I’m clearly the ideal person for the job. I do have a Diploma in Music, though I’m doubtful if that will be much help.

Here goes…..

A quick Google online says UK farms range from the small (20 acres) up to large (over 1000 acres). The average (mean) size of a UK farm is 88 hectares – or 217 acres. (The median might be more representative for the following estimate, but since I can’t find a figure for it, the mean will have to do for now). Another look online says the current  agricultural land prices range from a little over £10,000/acre for good arable land, down to about £7000/acre for less good pasture land. So for these calculations I’ll take a rough average of £9000/acre.

So an average farm includes land to the value of £9000 x 217 = £1.95M.

Of course, there’s more to a farm than that – farmhouse, buildings, barns, equipment etc. So lets assume that’s another £1M at least, and more for prize livestock.

How that translates into a number of farms is not clear, but it’s probably safe to assume a very large number of farms will be affected and the lower figure looks unlikely. For example, based on the above figures, small farm may have buildings worth £500,000 and will be subject to inheritance tax if it has more than 56 acres of land.

But we should note the budget is bound to reduce land values, so that might reduce the number.

But here’s the thing: farming profits are low – a few % at best, so most farmers have been having a tough time of it recently. (See episodes of “Clarksons Farm” on Amazon Prime for details). They tend to be asset rich, but cash poor. This means that on a farmers death, the average farming family will have to find £400,000 to cover tax, and the only way of raising it is to sell some of their land.

Now, Rachel from accounts may have lied about her experience as an economist, but she’s probably not stupid either. She, and her team, can do these calculations too and will appreciate their impact. So, what is their real motive in the budget? Redistribution of land, freeing up land for solar farms or housing, or … err, what? We should be told, and if it is part of a strategic plan to change the makeup of rural Britain, it really should have been in the Labour Manifesto prior to the election.

Whatever. These figures are probably wildly inaccurate, but at least they’re something to discuss.

Any other views out there?

Pubs in crisis.

As I understand it the Turks Head, Hasketons currently shut pub, has recently been sold for a figure slightly north of £600,000. I’ve got no idea who has bought it, but the now infameous Red Cat pub company (the current owners) have failed to make it work as a business and have decided to bug out. Prior to the whole COVID business it was a very successful gastro-pub, but Red Cat seem to have pulled off the impressive feat of running it into the ground in a very short time.

So far, so bad, but the problem seems to be nationwide. In todays paper I read that ‘Stonegate’, Britians largest pub chain, are struggling to service a £2.2bn debt. Given that they run about 4500 outlets (i.e. pubs, bars etc) that means that the average debt of each outlet is about £490,000. Now it’s possible the average value of each outlet is also about this figure, so the company might just be worth…. oh I don’t know, maybe, err – nothing. To me that seems completely bonkers – the business model must be completely broken and the owners asleep at the wheel for this situation to have arisen.

But if this reflects the current state of the so called, “hospitality industry”, we can expect a lot more disasters are going to fall upon Britians pubs. This is a great shame – I like pubs. They’re relaxing, pleasant, social places and I tend to feel good in them.

But the problem is quite obvious really – they’re just too damn expensive. I mean, over £5 for a pint of beer!!!!!! For goodness sake, that’s over 10x the cost of the ingredients. Over £7 for a modest glass of wine: they’re out of their minds if they expeact us to pay that – it’s more than I usually pay for a bottle! See my analysis of the price of a pint for a better insight. And then there’s the food – I’m sorry, but I’m not paying £15 per person for a meal I could cook myself. Not happening!

But in reality, the pub owner needs to make a profit, and the venue has to pay the wages of the staff. That’s probably 3 people. And there’s the problem in a nutshell.

Cast your mind back 150 years. (OK, that’s impossible – how would you know?) But take Samuel Moss as an example – he ran the Turks Head for about 50 years from 1859. By profession he was a thatcher. OK, it’s not really clear how much thatching he did during that period and the economics of the day were very different, but the point is, he didn’t have to rely on pub takings for an income.

So let’s go back to basics (as John Major said – ha ha, no , don’t laugh!). The British village pub started in an organic way – people, mostly women, brewed beer at home and sold it from or in their houses to all-commers. The whole business grew from that. No licencing laws, business rates or insurance in those days. Just do it! There were also ‘Inns’, which were stopping places for travellers: a different market, but the principle is similar – a simple supply and demand situation.

And maybe that’s the model for the future. We all become more sociable in our own homes. I, for example, enjoy brewing my own beer. Maybe I should make modest changes to my domestic arrangements and ‘entertain’ friends with my own brews on a more regular basis. Convert my workshop into a ‘man den’ where we can all relax – by invitation only of course. No need for anything formal (for obvious reasons), but payment in kind, bartering, favours, etc become the order of the day. Under the radar sort of stuff – not that I’d anything actually illegal, but maybe just see how far the current rules can be pushed.

Of course, the new owners of the Turks Head might play a blinder and we end up with a nice village pub again. Then the problem goes away. But it’s good to start thinking about alternatives….. Cheers everybody!