Budget decision to keep tax relief on red diesel for farmers is welcomed

Concern was expressed before the first Budget from new Chancellor Rishi Sunak, MP for Richmond in North Yorkshire, that the fuel relief might be scrapped.

Responding to the Budget, NFU president Minette Batters said: “The most significant decision today for British farmers is the announcement to retain the relief on red diesel. This is absolutely crucial and we are pleased to see the Chancellor has acknowledged our concerns. Red diesel is the primary fuel to run the majority of agricultural machinery, and it is incredibly important for the farm business that produce the nation’s high quality and affordable food.

“Changes to this duty could have virtually doubled fuel costs for farmers and, with no current alternative fuel for agricultural vehicles, this would have left farms immediately uncompetitive with many other countries who continue to provide lower fuel duty for their agricultural industries.

“This lower fuel duty on red diesel recognises its importance to farm businesses, their ability to produce food for the nation and the fact this machinery is mainly used off-road on farms.

“Many of these farm businesses have experienced the wettest winter in recent memory and thousands still find themselves underwater. We are really pleased to see the increase of £5.2 billion into flood defences, particularly the £120 million for the repair of damages caused by this winter’s storms. It’s crucial a significant chunk of this is spent on helping repair defences in rural areas.

“I would urge the Government to recognise and reward farmland that is used to store floodwater. Any flood management policy needs to reward farmers for this vital public service.

“The weather this winter is yet another example of how farmers are on the forefront of climate change and the NFU has an ambitious goal for agriculture to reach net zero by 2040. We look forward to seeing more detail on the new £640 million nature for climate fund and what role is seen for farming and food production within this, alongside playing its role for the environment.

“The NFU called for an increase to the structure and buildings allowance in its Budget submission and this increase will deliver more effective tax relief for farm buildings. It will go some way to supporting farms investing in modern, efficient infrastructure which could help to improve productivity and deliver our net zero ambition.

“We have seen in recent times a significant increase in fly-tipping on farms. The NFU has been calling for the government to invest in new approaches to tackling this crime and the extra funding to tackle this blight on our countryside is welcome.

“Finally, we recognise the Government’s commitments to helping small businesses with the impacts of the coronavirus. The commitment to cover statutory sick pay costs, providing business rates relief for many small businesses and mobilising banks lending for SMEs will help to provide resilience and support cash flow in these difficult circumstances.”

David Hall, NFU North-West regional director, had previously called for a range of measures to help farm businesses remain viable during the transition away from the European Union.

He said: “On the face of it, this Budget seems positive for the region’s farmers and growers and we will be looking at it in more detail.

“We are pleased about tax relief on red diesel as there has been quite a lot said on this in recent weeks, while we have been busy lobbying Government in the background.

“Changes to this duty could have virtually doubled fuel costs for farmers and, with no current alternative fuel for agricultural vehicles, this would have left farms immediately uncompetitive with many other countries who continue to provide lower fuel duty for their agricultural industries.

“We are also really pleased to see the increase of £5.2 billion into flood defences, particularly the £120 million for the repair of damages caused by this winter’s storms.

“It’s crucial a significant chunk of this is spent on helping repair defences in rural areas.

“I hope this Budget signals a period of sustained support from Government given the difficulties over the past few months for our members with the weather and storm damage, among other issues.”

In his response to the Budget, CLA president Mark Bridgeman made a series of comments on specific topics.

On Coronavirus response:

“This was a budget that backed small businesses through difficult times. We welcome the measures set out by the Chancellor to extend the retail discount to the hospitality and leisure sector, as well as abolishing business rates altogether for one year for firms with a rateable value below £51,000. This provides businesses not just with the opportunity to survive the Coronavirus scare, but to properly plan for the future and grow their enterprises.

On R&D funding:

“Technology can help ease some of the biggest challenges we face, not least in feeding the world, mitigating climate change and the loss of biodiversity. Yet Government currently spends far too little on research and development in the agri-tech sector. This needs to change. The Chancellor’s announcement that R&D spend will increase to £22 billion is welcome – so long as an appropriate share of it is used to ensure the rural economy reaches its economic and environmental potential.”

“At present, unincorporated rural businesses do not qualify for R&D tax relief, which puts a break on the development of the rural economy. This needs to change if the Chancellor is serious about ensuring R&D funding can best be distributed across the country to help level up every region and nation of the country.”

On the environment:

“The confirmed allocation of £640 million for a ‘Nature for Climate Fund’ for peatland restoration and tree planting is warmly welcomed. Landowners want to support the Government’s efforts, but Ministers must work with them to ensure they are fairly compensated. The system needs to take account of the loss of agricultural land, the cost associated with the planting and management of trees and to ensure the tax system doesn’t act as a barrier.”

On IHT and red diesel:

"Rumours that Agricultural Property Relief, Business Property Relief and the red diesel rebate might be scrapped caused significant concern among farmers, and the CLA lobbied the Treasury, Defra, MPs and officials intensively as a result. However, the fact we had to make the argument in the first place shows we must continue to fight for family businesses.”