rural productivity

How Boris Johnson can keep his promise to ‘level up’ rural Britain

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Really interesting article from a centre right think tank. It tells us:

According to ONS statistics, the rural economy is 16% less productive than the national average. If we could unlock that potential, the benefit to the economy in England alone would amount to an extra £43 billion each year.

The UK’s departure from the EU, and the changes in agriculture policy that have only just begun, are forcing farming businesses to adapt, seek new markets, change land use and diversify. Ultimately, they will continue to make a substantial contribution to a rural economy that in turn makes a sizeable contribution to the Exchequer. And with the evolution of farming and the rising importance of realising environmental objectives, as well as the need to mitigate climate change and embrace carbon sequestration, the pressure on farms to diversify their businesses is only increasing.

Diversification is a growing trend. The Defra Evidence Compendium shows that 66% of farm businesses in England in 2017/18 included some form of diversified activity, generating around £680 million in profit. Many farmers now make more cash from tourism than they do from growing food.

In spite of this, it remains extremely difficult for land-based businesses to diversify. There are many reasons – but speak to entrepreneurial farmers across the country and they will tell you one of them is the existing tax system, under which each revenue stream in a rural business must be reported on and taxed separately. Not only does this impose a large and unnecessary administrative burden on the business owner, but it can actively discourage the entrepreneurship needed for the Government to achieve its ambition to rebalance the UK’s economy.

A solution to this is the establishment of the ‘Rural Business Unit’ (RBU). RBUs would make sure that rural businesses which pass certain qualifying tests (relating to their activities such as agriculture or environmental management; management; size and income) are taxed as single entities, rather than a collection of revenue streams. As the CLA’s recent Budget submission suggests, a simplified regime of this kind would give farmers more opportunities to grow and diversify their businesses. At the moment, they are condemned to wasting time filling out several lengthy tax forms, which requires them to spend time focusing on the minutiae of what cost should be apportioned to what income stream, or to facing large bills if an accountant has to help them.

It would also encourage farmers to think of themselves as entrepreneurs, as the RBU would make it easier to use assets and other resources across different facets of the business, as new opportunities materialise.

This proposal is one of the pillars of our Rural Powerhouse campaign, which we developed to unlock investment and economic growth in rural areas. It’s a campaign that has four other main aims – to connect the countryside fully, to establish a planning system fit for rural communities, to make farming both profitable and sustainable, and to push investment in skills and innovation – the realisation of which will be necessary for the countryside to meet its true potential.

UK shift into less productive work

Very revealing article. We were talking to our friends in Upper Teesdale about just this phenomenon today. This article tells us:

Since the 2008 financial crisis, productivity has barely grown at all.

But new research now provides part of the answer to this puzzle.

The Office for National Statistics (ONS) suggests that it is not so much that we don’t have productive industries, it is just that more of us are working in the unproductive ones.

Productivity is the main driver of long term economic growth and higher living standards.

The study of changes in productivity before and after the credit crunch, shows that before it struck people were moving into more productive industries and productivity was growing at 2% a year on average.

But since then there has been a shift away from working in highly productive areas like mining to less productive ones like food and drinks services.

It seems too many cooks really can spoil the broth.

There was lower productivity growth in some industries as well, such as telecommunications and finance. The property sector saw a rapid growth in productivity.

However, the largest factor seems to be that far more people have found work in parts of the economy that are just not that productive.

There has also been a sharp decline in labour mobility, normally you would expect people to move from lower paid and unproductive industries to higher paid and more productive ones.

One reason for that might be that high house prices make it more difficult and less attractive to move around the country for new, better jobs.

Rural Productivity Plan

I’m writing this just on the cusp of the plan being released. I understand it will be bold and ambitious. A bit of a change from recent tepid outputs on rural policy. It will have meaningful approaches on: live/work in rural places, mobile connectivity in rural places, new physical infrastructure and some thoughtful approaches to Education. I will reflect more once I have had time to scrutinise the plan next week but at first glance its a potentially very exciting development.