Parliamentary inquiry into rural productivity

The parliamentary inquiry into rural productivity is nearing the end of its evidence-gathering stage. A further two sessions have taken place, on skills and the tax system, with a final evidence session on how government processes deliver rural objectives in December.

The APPG’s focus on skills – often a catch-all term – was a wide-ranging one. Giving evidence during the session was CLA Chief Susan Twining, the LEP Network, and former Harper Adams professor Charles Cowap. In ascertaining what skills – if any – are lacking, the panel asked about the skills needed for the rural economy in the future. As well as a discussion on the more ‘conventional’ requirements such as management and leadership skills or technological expertise, was the emergence of natural capital markets and the skillset required in order to take advantage of new opportunities.

Also considered were the structural issues that impact the attractiveness of rural areas as places to live, and consequently productivity. Affordable housing, transport links, connectivity, job prospects and wages were highlighted as barriers to productivity, as well as the economies of scale that small businesses often just can not compete with. These issues are all inter-connected and while there is no silver bullet, digital connectivity was considered to be the main driver.

Addressing labour shortages requires both short and long-term solutions, but crucially they need to be rural-appropriate, such as shared apprenticeship schemes. There are opportunities within agriculture for robotics, and there are also opportunities to re-brand the perception of agricultural and hospitality jobs, which an emphasis on quality, future prospects and qualifications would help with. Providing incentives such as vouchers to stimulate the uptake of training and development of staff among businesses was one recommendation, as was the age-old need for recognition that the rural economy is more than just agriculture – to consider the 95% and not the 5% - which could have a fundamental effect on the government’s approach.

The session on taxation looked at how the tax system acted as a barrier to rural productivity. Witnesses included CLA Chief Louise Speke, the Federation of Small Business and the Central Association for Agricultural Valuers who considered the demands from the government’s Making Tax Digital scheme, the complexities of the tax system in the UK and a subsequent under-awareness of tax credits available among SMEs.

There were also discussions on how we could encourage housing development through taxation, the impact of the VAT increase on tourism and hospitality businesses, as well as the discrepancy between VAT on new-builds compared with VAT on renovation and repairs, how tax could improve productivity within land use and agriculture, and general business support.

There was consensus among witnesses and panellists that the CLA’s Rural Business Unit would simplify the tax system for rural businesses, making it easier for businesses to diversify and reducing bureaucracy and time lost to administration. The importance of having stability over a longer period for the Annual Investment Allowance would help businesses looking to make investment decisions, as well as the need for government to extend R&D tax credits to sole traders and family partnerships so that the majority of rural businesses can benefit from these.

The final session, taking place in December is looking at the delivery of rural objectives through government processes, such as rural-proofing. Time and time again we have seen policies ill-thought through for rural areas, and with Rural Affairs Minister Lord Benyon and shadow Secretary of State Luke Pollard giving evidence to the session, this will be a great opportunity to evaluate the current system.

Following this, the APPG will be producing a report in early 2022.