Windfalls, No Cider

BY JIM WEBSTER

The thing about farming is that yields fluctuate. You can plant the same acreage in two successive years. Sow the same variety, put on the same sprays and inputs, and see what happens. One year, because the rain came at the wrong time, the sun just scorched what was left. Next year everything fell just right. So, one year you didn’t even cover your costs, the next year there was so much crop that you had to stack it higher just to get it home.

The basic lesson of agriculture is that if everybody has a poor crop, prices go up. People do genuinely want to eat. If everybody has a good crop, you can struggle to give the damned stuff away. It was a truism that farmers only made money in times of shortage.

We’re not the only people who face an uncertain market.

You can tell I was in London, I picked up a copy of Cityam. A free newspaper. Take Shell. Back in spring 2020, Shell lost about £22 billion, yet due to levies, excise duty and similar, paid £38 billion in tax. BP lost £16.5 billion and paid £29 billion in tax. This year, the oil price has gone up, they’re making money. People are demanding a windfall tax. Which is fair enough but there are two things that ought to be considered. If you pay windfall taxes in good years, surely you ought to be entitled to a bailout in bad years?

With agriculture it’s the good years that pay for the bad ones.

I remember somebody who grew a lot of potatoes talking about the margins. He reckoned that in a ten-year period, he’d have five years when he lost money, four years where he at least broke even, and the tenth a helicopter year (because the profit was so big you could have bought a helicopter) was seriously profitable and he made a mint. But had the government stepped in and collected a windfall tax off him, he would have slowly gone bust. In that 10th year not only did he pay off the debt he’d slowly accumulated, he replaced the worn out machinery and other kit that he’d not been able to replace in previous years.

The other thing to remember is who pays a windfall tax. Look at the supermarkets who made a lot of money because the hospitality industry closed over lockdown? Or all these delivery companies who suddenly sprang into existence. And what about Amazon and others who increased market share? Slam a tax on them.

But it goes further. What about all those people who switched to working from home and got a full salary but no longer had the cost of the commute. What about taxing that windfall profit, so that government has the money to hand out to those on low pay who had to go out to work throughout the entire pandemic?

It would be awfully easy to pick on ‘profiteers’ and those ‘gouging’ the consumer. With damn all effort, you can soon find a reason to screw extra tax off groups you don’t like. In fact, that seems to be the justification for a lot of the windfall tax claims. Oil companies have few friends. But if I was a supermarket boss, frankly I’d be a little wary about drawing too much attention to the situation in case eyes wandered across to look at me.

I was chatting to people in one meeting and we were trying to puzzle out why there has been so little meaningful response to a coming food crisis from so many countries. Whilst the EU has taken different steps to the UK, neither response has been the response of someone who thought the issue was important or even real. The general feeling was that we have two factors working. The first was there is now a well-funded environmental lobby who doesn’t want to lose the territory that they’ve gained over the past decade or so.

The second factor is that bureaucracies are inevitably slow to turn round, unless you have sharp political leadership which understands what is going on and acts with authority.

Unfortunately, when it comes to agriculture, nobody in politics seems to have a clue. Whether you look at government or opposition, none of them seem to have made any sensible radical suggestions. Probably because between them, they haven’t a clue.

My gut feeling is that things will have to get very bad before the UK and EU governments do anything meaningful to push up production. A lot of people still haven’t realised that when the Tanks rolled into the Ukraine, we switched the lights off on an old world and stepped through into a new one.

You want another worldwide UN Climate Change Conference? Sure, you can have one, provided of course you recognise Putin’s puppet government of the Ukraine. We have the German Green Party (initially pacifist) supporting sending German heavy weapons to the Ukraine and being willing to stomach a short-term increase in coal burning if it becomes necessary.

People are going to get hungry, (and in this coming winter, cold). Take Turkey, the world’s largest exporter of flour, making up some 85% of Egypt’s imports of flour. However, domestic Turkish wheat production cannot meet flour production demand and as such, Turkey imported some 5m tonnes of wheat from Russia in 2019.

You can impose all the windfall taxes you like, but until you have a political class that takes food seriously, they won’t make a bit of difference to the situation of the poor in this or any other country.

Jim Webster farms at the bottom end of South Cumbria. Jim was encouraged to collect together into a book some blog posts he’d written because of their insight into Cumbrian farming and rural life (rain, sheep, quad-bikes and dogs) It’s available here.