by Charles Miles
The ownership and occupation of land in the country have always been in the public eye. Rural businesses have thus been subject to criticism from people and bodies who are concerned to protect and preserve the countryside. This criticism is often levied by those who appear not to understand that the land is used for the production of goods and services which they themselves demand — and furthermore that the countryside exists in its present form solely because of those uses, under the influence of which it is constantly changing.
As well as being under public pressure (which is sometimes ill-informed) land use and ownership are also subject to control and regulation by the law. This law, which prescribes the relationship of owner to occupier and which can override a contract made between them, is supplemented by the bias of changing taxation which may encourage or discourage the production of goods and services and alter the availability of land for different uses.
Such governmental interference applies in some ways uniquely to the practices of land use and ownership, but it applies in other ways to all forms of production and exchange as well as to the tenure and management of all types of property. But the practices of agriculture, forestry and rural land use generally are themselves open daily to the interested gaze of the public in a way which applies to few other commercial activities. Rural land use and management have therefore to function subject to constraints and criticisms more sharply applied than those bearing on most other industries. This paper, however, is not set to complain about public interference in (or even indifference to) the process of land management and use. It is not a new phenomenon, though it may be more apparent today than it was in the past, and it will not go away: my purpose is instead to examine some of those immediate problems facing the country landowner and occupier in the exercise of their trust.
Problems, however, vary with the objectives and scale of any enterprise, so that a major problem in one case may be only a minor one in another — or may be no problem at all. Estates and their current problems have therefore to be examined generally rather than specifically and thus may be categorised under three main headings:
- the social aspect
- the financial aspect
- the legal aspect
While problems may thus be categorised it must be acknowledged that each is dependent upon and influenced by the others, and this separation is therefore merely a convenience.
The social aspect
The social aspect of land use and occupation is the impact of these uses upon the locality in which they are carried on and on those who live or visit it. It is in this sphere, obviously, that land use affects people other than those who use the land. Here, the practices of land use are uniquely blessed or cursed, in that every action of the user is in the public view and is open to comment and criticism. How to inform, use and perhaps divert this criticism is now a major problem. Public interest cannot be ignored, but it can nevertheless interfere considerably with the processes of management and the practices of land use (be they farming or forestry or other activity) through which somebody is trying to earn a living.
This interest may be expressed by those who live in the country — but who may not fully understand it; by those who live in the town and visit the country — but who do not understand it at all; or it may be expressed by representatives of a number of specialist organisations anxious to protect their own point of view — which may be of general concern or which may, on the other hand, be narrowly based. Decisions have to be made about land use by landowners, farmers, foresters, market gardeners, craftsmen, recreationalists and others, and many factors have to be weighed in the balance: not the least of these are the often well-articulated demands of those whose living is not from the land but who nevertheless claim a right to be heard.
Those who make these demands are sometimes in conflict with those whose livelihood can depend upon the successful establishment of a changed land use against which the garden gnome cries out. How far is compromise possible? For example, farmers do not always welcome ramblers, however careful the latter may be to keep to the designated pathway; but such is the turn of human nature that ramblers may find farmers positively obstructive or perhaps merely negatively negligent. Both sides may have to give a little.
Increasing public awareness of the effects of farming or other practices on the physical appearance of the countryside, with demands for public access, have to be faced: they are growing no less. Indeed the landowner is sometimes seen as an enemy to be defeated rather than a partner whose co-operation should be won. Often a straightforward proposal (such as to realign a footpath) gives rise to an automatic objection rather than a willingness to accept what may be a reasonable request. All objections have to be met and answered in the course of land management, but they can slow that process up very considerably. “Green” pressures are growing, and in meeting them much valuable time is taken up — even wasted. Of course the extent to which this is a “waste” depends upon which side the observer is supporting; but must there always have to be sides?
The financial aspect
The financial aspect of land management and use acknowledges that both are driven by the need to maintain viability so that the quality of the landholding, or of the business structure, may be maintained and, as time goes by, improved. The quality of the landholding, of the investment in land, depends entirely upon the stability of the land use itself. If the land in its productive use, or in its ability to provide services, is unable to support itself, then it must — to the extent of the deficit — hang upon the prosperity of other industries or services (perhaps not at all connected with the land) if indeed the structure of the countryside in both human and environmental terms is to be maintained. If rural land use cannot support rural land then the land and the social structure built upon it must deteriorate or else rely to some degree on outside support.
If the nation calls for what it considers to be a well-maintained countryside, but in the process inhibits land use from producing the resources to support that maintenance, then the nation must find the balance. This is not a plea that the landowner or farmer should, without restriction, do what he likes with his own, but a warning that that nation, and those who make it up, must recognise that conservation must be paid for, and that the more conservation is interpreted as preservation the more expensive that process will be.
Taxation inevitably reduces the private resources available for upkeep and improvement, but in this farming and landowning are by no means unique; income and capital taxes cannot be singled out for special blame. Farming and landowning are adequately treated in comparison with other forms of wealth and business, yet there are aspects of taxation which make rural land management and use difficult or peculiar. The complexity of the taxation system, and of capital taxes in particular, make management planning a problem incapable of ultimate solution; indeed its unpredictability, its tendency to change almost yearly ensures that a business plan based upon current tax law will be outdated sooner rather than later.
This is especially so in the area of capital tax planning which is a product of taxation wherein hunter and hunted change tactics as the chase progresses. Some, for example, see the restriction on capital gains roll-over relief on gifts imposed in 1989 as a major problem, particularly for owners of historic houses. All accept the gamble of the potentially exempt transfer with a relief tinged with exasperation that planning the continuation of ownership should be left as to the chance of the dice’s throw.
Forestry
Most agricultural estates have woodlands, many of which are uneven, aged and consist of both hardwoods and softwoods. For those estates which are not substantially forestry investments the abolition of taxation on woodlands will pose a considerable problem. It will prove impossible in many cases from 1993 to manage woodlands in such a way as to eliminate losses, and the fact that from that date onwards such losses will not be allowable for set-off against other taxable income may result in the virtual abandonment of many estate woodlands.
The new regime must cause estates to look closely at the long-term viability of hardwoods and it appears set to encourage the planting of softwoods on as short a rotation as possible (which is just what interested environmentalists wish to discourage).
A correspondent argued that the present proposals for the lifting of taxation from woodlands is a disaster. “Unless we get, as I hope shortly we shall, a reasonable maintenance grant, I propose to discontinue any further maintenance of my woodlands. I cannot and will not do it out of post-tax income,” he declared. Indeed it seems strange that the trade of forestry should not be treated in exactly the same way as other trades. If its losses must be financed out of profits arising from other enterprises and investments, what is the harm in this?
Community charge
The introduction of the community charge has caused many difficulties for employees living in tied houses rent and rates free under the terms of their employment. These difficulties are by now well known and marginally understood, but they are no more easily solved. How to deal fairly with the community charge is indeed a current problem facing farmers and landowners in particular. To pay each employee’s charge where rates were previously paid on his tied house seems a fairly simple (though expensive) solution, but how far should this go? What of those employees who live in their own houses while their fellows are in tied houses? Is their position to be ignored? Some employees earn more than others; where is it fair that the employer should draw the line above which he makes no extra contribution towards the charge? Does he devise some scheme of marginal relief? Should he offer to pay the charge of the non-working wife?
No solution will be seen as fair by all employees and may be a source of that resentment and difficulty which raises again the general problem of the tied house. This is indeed becoming an anachronism, carrying as it does an obligation on the employer to think about houses for retired estate staff who have had no opportunity to acquire their own. How should an employee “earn” a retirement house? What, if anything, should be done to provide such houses for estate tenants’ retired staff? The tied house problem may not be immediate, but it is going to arise and a continuing community charge may bring it to the fore. Perhaps this indeed is an argument to retain the community charge?
The legal aspect
When, more than 40 years ago, life-time security of tenure was introduced for yearly tenants of agricultural holdings, it was recognised and largely accepted that some form of long-term security of tenure was necessary in the farming world, for the tenant’s investment in his business was, and remains, large and can be amortised only over a long period. At that time the decline in the rented sector had not really started. Fiscal and legal moves over the next 30 years ensured that it did so by, for example, taxing farm rents as investment income at a 15% surcharge, by threatening to nationalise rented land (why not owner-occupied land?) and by arbitrarily granting to suitably qualified heirs of agricultural tenants the right to inherit farm tenancies for up to two generations (and what would have happened at the end of that time, another extension?).
These moves against the landlord and tenant system, whether they were seen as such or not, successfully persuaded a large number of agricultural landowners to cease letting farmland when it came vacant.
It was understandable also, in an era of considerable agricultural prosperity, for the owner to take the rare chance of converting over-taxed rental income into a potentially greater amount of less highly taxed earned income from an in-hand farm, possession of which carried at the same time a considerable extra capital value which could be realised easily if the need arose. The abolition of the investment-income surcharge in the early 1980s, the repeal of the tenancy succession laws, the dip in the fortunes of farming might have produced a greater willingness on the part of the agricultural landowner to let land again, but this has not yet become evident.
Moves to legalise term or retirement tenancies are still being made and, if successful, might revitalise the tenancy sector; but there are now a number of owners who are unwilling to trust any government not to reverse legislation if the chance arises. Such die-hard owners are resolute not to relet any farms where possession has been obtained. To owners and advisers, therefore, the problem of whether to let farms which become vacant remains a current one, made harder now when a farm already in-hand and managed by a farm manager on a substantial and well-deserved salary struggles to break even.
In the agricultural world the problem of the alternative enterprise must be looked at. The use of agricultural land and/or buildings for a non-agricultural purpose, bound up on let land with the need to decide whether to encourage tenant farmers to expand into non-agricultural use, must be considered. Any such change of use may have peculiar effects. Non-agricultural use by a farm tenant may well be outside the terms of his agreement. If permitted, it may cause that sector of the farm to lie outside the terms of the Agricultural Holdings Acts and perhaps become, instead, subject to the Landlord and Tenant Act 1954. Non-agricultural use (possibly whether sanctioned or not) may remove a sector of the farm from the Inheritance Tax protection of reduced values on transfer and the ability to pay the tax in interest-free instalments over 10 years: but is it not reasonable to encourage the survival of the tenant’s business by encouraging him to diversify? Or should redundant farm buildings, for example, be made the subject of the owner’s application for planning consent for a change of use, upon the attaining of which he might, under the law, repossess them and leave the farm tenant to make his living, as he contracted to do, out of farming only? Owners treat these problems in their own ways and in accordance with their own convictions, but the problem is a real one with which the Agricultural Holdings Acts are not geared to deal.
We live, as we always have, in difficult times, made no easier by public interest in the countryside stirred by a sales-conscious media and the shrill voice of the uncommitted.
