Latest / Merryn Talks Money / The Farmers Are (Rightfully) Angry and UK Inflation Ticks Up

Transcript

The Farmers Are (Rightfully) Angry and UK Inflation Ticks Up · Merryn Talks Money

• 0:03
  Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
• 0:10
  Speaker 2: I'm going to start this episode of Merin Talks Money
• 0:12
  Speaker 2: with another reminder of all of your Merrin Talks Money listeners.
• 0:15
  Speaker 2: I have launched a weekly Merin Talks Money newsletter. It
• 0:18
  Speaker 2: is the place, the only place, well except for John's
• 0:20
  Speaker 2: newsletter of course, to get Micro to macrow thoughts on
• 0:23
  Speaker 2: your money and investments. The second one hits your own
• 0:25
  Speaker 2: box on Saturday. It's for Bloomberg subscribers only, so be
• 0:28
  Speaker 2: sure to sign up at Bloomberg dot com slash Newsletters
• 0:32
  Speaker 2: or check out the link in the show notes, but
• 0:33
  Speaker 2: you'll take you right to it. Welcome to the Merin
• 0:45
  Speaker 2: Talks Money Weekly round up, our debrief on the biggest
• 0:48
  Speaker 2: stories in markets and economics. I'm meresumsepweb Editor at Large
• 0:51
  Speaker 2: for Bloomberg UK Wealth.
• 0:53
  Speaker 1: And I'm joined Stepfe, senior reporter and author is the
• 0:55
  Speaker 1: Money Distilled Newsletter.
• 0:57
  Speaker 2: Okay'm putting that down as the first John actually remember
• 0:59
  Speaker 2: to introduce the self. Yes, yes, I'm getting the other
• 1:03
  Speaker 2: week where he just sits there and wait for me
• 1:04
  Speaker 2: to do everything. Right. Listen, jump, We've got a few
• 1:07
  Speaker 2: important things to talk about. I'd say some people would
• 1:10
  Speaker 2: say that farmers an inherent taxes not the most important
• 1:12
  Speaker 2: story of the week. I would say it might be
• 1:14
  Speaker 2: the most important story of the week. So they're very,
• 1:17
  Speaker 2: very angry. You've written about this.
• 1:19
  Speaker 1: Why are they so angry, Well, they're angry kids. There's
• 1:21
  Speaker 1: been asked to be inheritance tax and they won't be
• 1:23
  Speaker 1: nice to pay it before. And everyone hates inheritance tax
• 1:26
  Speaker 1: in the first place, for reasons we can talk about
• 1:30
  Speaker 1: if we want to a bit, probably not, But more importantly,
• 1:33
  Speaker 1: you know, the issue with farmers, actual farmers, and a
• 1:36
  Speaker 1: lot of them made this point, is that their land
• 1:39
  Speaker 1: is worth a lot of money, but it doesn't generate
• 1:41
  Speaker 1: a very big returnment. In fact, from some of the
• 1:44
  Speaker 1: figures that they put out, your like, how does anyone
• 1:48
  Speaker 1: level and this.
• 1:49
  Speaker 2: Is the making sure less than a one percent return
• 1:52
  Speaker 2: one cent return on the value of the land.
• 1:54
  Speaker 1: Yeah, And so basically, if you get chancing editance tax
• 1:57
  Speaker 1: on that, even though it's at twenty percent, and even
• 1:59
  Speaker 1: though law or broadly speaking, is over three million pounds, no.
• 2:03
  Speaker 2: No, no, it is not. It's over three million pounds
• 2:06
  Speaker 2: if you've got a a wife or a husband who
• 2:09
  Speaker 2: you can share it with. And I have to say.
• 2:10
  Speaker 2: Were speaking to a farmer the other day who said
• 2:12
  Speaker 2: to me, you know, when a government gets to the
• 2:14
  Speaker 2: point where they're grasping straws like if you're married, it's
• 2:17
  Speaker 2: more they're really in a whole part of trouble. But
• 2:21
  Speaker 2: I mean, really three million then is it?
• 2:23
  Speaker 1: No, it's not human But I mean how many single?
• 2:25
  Speaker 1: Like I mean, I don't know.
• 2:27
  Speaker 2: You know, we don't normally make In fact, we very
• 2:30
  Speaker 2: explicitly have not over the last couple of decades made
• 2:33
  Speaker 2: policy to suit married people. You know, we have not
• 2:36
  Speaker 2: made a big thing out of using the tax the
• 2:38
  Speaker 2: tax system to incentivize marriage. So to now turn around
• 2:42
  Speaker 2: and said, you know what, farmers get married, it's slightly
• 2:45
  Speaker 2: weird policy take anyway, that's in a sign I'm not
• 2:48
  Speaker 2: going to get bogged down.
• 2:49
  Speaker 1: And to be that one slightly hank just because you know,
• 2:53
  Speaker 1: there's the found no family days, there's loads of stupid thing.
• 2:56
  Speaker 2: But another time, another there'll be a whole personal finance
• 3:00
  Speaker 2: podcast on why you should get married.
• 3:02
  Speaker 1: We should do that.
• 3:03
  Speaker 2: Maybe it's nice to be married too, by the way,
• 3:07
  Speaker 2: it's not just oh yeah right John, yeah.
• 3:09
  Speaker 1: And also I see why don't people get married it's
• 3:12
  Speaker 1: like this.
• 3:16
  Speaker 2: It's not right farmers. Farmers are not making much money.
• 3:21
  Speaker 2: They've been big because of their subsidies. A big shift
• 3:23
  Speaker 2: in the way substies are paid away from acreage towards
• 3:25
  Speaker 2: more you know, sustainable by diversity, blah blah, that kind
• 3:28
  Speaker 2: of thing. Lots of uncertainty, nasty supermarket. It's very low margins,
• 3:32
  Speaker 2: rises to minimum wage and I all this stuff eating
• 3:35
  Speaker 2: away at their income. We see this very low return
• 3:37
  Speaker 2: on capital. Then you get whacked with a great big
• 3:40
  Speaker 2: inheritance tax bill and they say, well, it's all fine,
• 3:42
  Speaker 2: you get ten years to pay it. But if you're
• 3:44
  Speaker 2: making almost nothing, paying a half a millionquid or eight
• 3:46
  Speaker 2: hundred thousan pounds or whatever it is from your your
• 3:49
  Speaker 2: five million pounds form isn't going to happen anyway. So
• 3:52
  Speaker 2: they end up selling. And there's an argument about how
• 3:55
  Speaker 2: many people will pay this tax and how many people
• 3:58
  Speaker 2: will have to sell EXCEP for a number range from
• 4:00
  Speaker 2: the government saying almost nobody, only a third of farms
• 4:03
  Speaker 2: will be liable, five hundred farms a year, it's almost nothing,
• 4:06
  Speaker 2: to other people saying basically it's everybody except for the
• 4:08
  Speaker 2: hobby farmers. You know, and if five hundred farms a
• 4:11
  Speaker 2: year are hit by it, and those are the medium
• 4:13
  Speaker 2: sized farms, because let's not forget that the very very
• 4:15
  Speaker 2: big ones will have a way to mitigate and also
• 4:18
  Speaker 2: sell bate to land without destroying their family's livelihood, et cetera, etc.
• 4:21
  Speaker 2: So up the top probably fine. Down the bottom and
• 4:25
  Speaker 2: the hobby farmers, etc. The people with other jobs also fine.
• 4:28
  Speaker 2: Who's not fine? It's the people in the middle again.
• 4:31
  Speaker 1: Yeah, I mean that's the fundamental problem with inheritance tax
• 4:34
  Speaker 1: generally as well. The people like this, they are much
• 4:37
  Speaker 1: lower actual rate than the people who are just getting
• 4:41
  Speaker 1: caught by it, even amongst townese like me. The practical
• 4:46
  Speaker 1: issue underlie in this is that the reason inheritance tax
• 4:48
  Speaker 1: wasn't Charleston farms and wasn't Charleston business properly is because
• 4:52
  Speaker 1: you want family businesses and small businesses to be able
• 4:55
  Speaker 1: to go through succession, which is already a vago traumatic
• 4:59
  Speaker 1: period for all businesses, without also getting hit with our
• 5:03
  Speaker 1: massive kind of like tax charge which basically boils down
• 5:06
  Speaker 1: to tax on your lack of luck. And you know,
• 5:13
  Speaker 1: possibly you know, yeah, with enough planning and enough resources
• 5:17
  Speaker 1: to devote to plan and you can minimize inheritance tax.
• 5:19
  Speaker 1: This hasn't done anything to do that, and the government
• 5:22
  Speaker 1: basically says that it wants to target people like Jenny
• 5:24
  Speaker 1: Clarkson or Dyson who do own an awful lot of farmland.
• 5:29
  Speaker 1: And that's you know, at least partly because of its
• 5:32
  Speaker 1: tax efficiency, which they've.
• 5:34
  Speaker 2: Both said in the past. Business, you have a large
• 5:38
  Speaker 2: amount of money, you want to pass it down to
• 5:40
  Speaker 2: your kids tax free. Why would you not buy farmland
• 5:42
  Speaker 2: and do that? And then, of course, you know, if
• 5:44
  Speaker 2: you do leave it to your children tax free, resets
• 5:46
  Speaker 2: for capital gains tax, doesn't it post IHD or non IHD,
• 5:50
  Speaker 2: so someone can then flog it on for nothing for
• 5:52
  Speaker 2: no tax paid immediately afterwards. So it's a great way
• 5:56
  Speaker 2: to preserve the value of your estate for your's And
• 5:58
  Speaker 2: I totally see you might say you and I might say,
• 6:02
  Speaker 2: let's just get rid of inheritance tax. This is a
• 6:04
  Speaker 2: terrible test tax. It runs lives, doesn't raise very much money,
• 6:07
  Speaker 2: everyone hates it. Just be done with it. But clearly
• 6:09
  Speaker 2: the government is not going to say that. But if
• 6:12
  Speaker 2: you must have inheritance tax, this seems like a really
• 6:16
  Speaker 2: bad thing to add it on to a really bad
• 6:18
  Speaker 2: thing to add it on to. If we want family
• 6:22
  Speaker 2: businesses and farms and other family businesses to have multi
• 6:26
  Speaker 2: generational lives, which we're always saying we do, we want
• 6:29
  Speaker 2: to think long term. We want businesses to stay in families,
• 6:31
  Speaker 2: want them to grow in families, etc. This is exactly
• 6:34
  Speaker 2: the kind of thing that will prevent that happening. So
• 6:37
  Speaker 2: this is not just about farms for me. I mean,
• 6:39
  Speaker 2: I think that the farmers have valid points, and I
• 6:42
  Speaker 2: think we want to I think anyway, not everyone will
• 6:44
  Speaker 2: agree that the cultural inheritance of the uk s farming
• 6:47
  Speaker 2: sector is important as well. Not everyone will agree with that,
• 6:49
  Speaker 2: and I understand that, But it seems to me this
• 6:51
  Speaker 2: is about all all.
• 6:52
  Speaker 1: Sorts of businesses. Yeah. And the thing it's more of that,
• 6:56
  Speaker 1: it's regardless of your feelings about farmers or otherwise, one
• 6:59
  Speaker 1: way or the other. The point is this is a
• 7:02
  Speaker 1: very disruptive change for businesses and the reason that it
• 7:06
  Speaker 1: wasn't there in the first place is because that was
• 7:08
  Speaker 1: recognized as being a problem. The way that labors introduced
• 7:11
  Speaker 1: it has just made that a problem and it hasn't
• 7:14
  Speaker 1: addressed the things they ostensibly want to capture, which is
• 7:18
  Speaker 1: that they want to basically stop people from using what
• 7:21
  Speaker 1: they describe as a loop pole, whereas it's no, it's
• 7:24
  Speaker 1: just one of the rules and this is one of
• 7:25
  Speaker 1: the side effects, and that's not going to happen. And
• 7:28
  Speaker 1: I mean, I thought your idea, which some other people
• 7:31
  Speaker 1: have echoed as well, that it's long probably did actually,
• 7:35
  Speaker 1: But you know, as long as it's a going concern,
• 7:38
  Speaker 1: as long as you're still using it as a farm
• 7:40
  Speaker 1: or as a business, then the IHT liability should only
• 7:45
  Speaker 1: kick in as soon as somebody had ourselves the farmland
• 7:48
  Speaker 1: to use for something else, or they sell their business,
• 7:51
  Speaker 1: or the business goes public, say, and then at that point,
• 7:54
  Speaker 1: you know, it could be charged on the business.
• 7:57
  Speaker 2: And with that reminds me if you wanted to, you
• 7:59
  Speaker 2: could make it for them. If what you're trying to
• 8:01
  Speaker 2: do here is encourage longevity of a business, it doesn't
• 8:03
  Speaker 2: really matter what the rate is on sale. You can
• 8:05
  Speaker 2: align it with other inheritance tax rates. And the other idea,
• 8:08
  Speaker 2: by the way, I mean that was our first thought
• 8:10
  Speaker 2: to the war. You could do is say, okay, you
• 8:11
  Speaker 2: have to pay inheritance tax, but you don't really have
• 8:13
  Speaker 2: to pay it unless you say And also the idea
• 8:16
  Speaker 2: being that that liability arrives on death on the farm
• 8:22
  Speaker 2: being passed down, but it then declines over the years.
• 8:24
  Speaker 2: So if you keep the farm for ten years, then
• 8:26
  Speaker 2: by the end of their ten years liability it's probably gone. Right.
• 8:29
  Speaker 2: But RSM the accountants, they had another idea about putting
• 8:33
  Speaker 2: IHD to one side completely and saying, well, likely, why
• 8:36
  Speaker 2: don't we do it another way and have these assets
• 8:39
  Speaker 2: attract capital gains tax. So at the moment if you die,
• 8:43
  Speaker 2: the capital gains on any of your assets are effectively
• 8:46
  Speaker 2: wiped out for tax purposes, right, which is kind of
• 8:48
  Speaker 2: a weird glitch in the UK tax system. So how
• 8:51
  Speaker 2: about this is their idea Instead of the capital gains
• 8:54
  Speaker 2: liability being wiped out, it remains and in the same
• 8:57
  Speaker 2: way we've discussed with inheritance tax, it stays with the
• 9:00
  Speaker 2: farm or business until sale, at which point it's payable.
• 9:04
  Speaker 1: Yeah. I think that makes an awful lot of sense.
• 9:07
  Speaker 2: Is basically your delaying tax payment until the money exists.
• 9:10
  Speaker 2: And this is one of the weird things about about
• 9:12
  Speaker 2: I actualained this context is the best way to get
• 9:16
  Speaker 2: in big tax revenues is to charge people tax when
• 9:19
  Speaker 2: they have money, which is one of the reasons that
• 9:21
  Speaker 2: we've discussed this before. We don't understand why it is
• 9:24
  Speaker 2: the buyer who pays stamp duty on the exchange for
• 9:27
  Speaker 2: property as opposed to the seller who's the one with
• 9:29
  Speaker 2: the money the seller. And if the purpose of tax
• 9:32
  Speaker 2: is to raise tax revenue, then charge people when they
• 9:36
  Speaker 2: have money, not when they don't have money. And that's
• 9:39
  Speaker 2: the big flaw from the purposes of a revenue collector
• 9:42
  Speaker 2: in this idea.
• 9:43
  Speaker 1: This is stupid, stupid idea. The other thing, look, did
• 9:46
  Speaker 1: want very quickly ask if t is because I am
• 9:51
  Speaker 1: baffled by the fact that from a financial person's point
• 9:55
  Speaker 1: of view, the idea that you've got this as that
• 9:58
  Speaker 1: is somewho w was millions of p owns. But the
• 10:00
  Speaker 1: yield is sometimes sub one percent? Why don't you sell
• 10:04
  Speaker 1: it or and put the money in gilts? Is the
• 10:07
  Speaker 1: way the mainset works. And it's also how can nison
• 10:11
  Speaker 1: have a yield to one percent? It shouldn't. The yield
• 10:14
  Speaker 1: should be at least five which means that the capital
• 10:16
  Speaker 1: value of the line should come down. So what is
• 10:19
  Speaker 1: the story?
• 10:20
  Speaker 2: They else, Well, there's a lot of competition for land,
• 10:22
  Speaker 2: isn't that that's the actual farmers and actual farmers, generational
• 10:26
  Speaker 2: farm farming families. They don't want to sell their land.
• 10:28
  Speaker 2: They like being farmers, they like living on that land,
• 10:31
  Speaker 2: they like their lifestyle. This is what they want to do.
• 10:33
  Speaker 2: It's what they mean. The families have done for generations, etc.
• 10:36
  Speaker 2: Why would you not do that just because the land
• 10:38
  Speaker 2: underneath you has changed in value, right, It doesn't make
• 10:43
  Speaker 2: sense to farmers to sell the land. They want the land.
• 10:46
  Speaker 2: And then this competition for land from the lifestyle farmers,
• 10:48
  Speaker 2: people who want big gardens, people who like to have states,
• 10:50
  Speaker 2: people who you like to shoot or whatever it is
• 10:53
  Speaker 2: people like to do on land. You know, land is
• 10:55
  Speaker 2: something people own for for reasons other than just to
• 10:59
  Speaker 2: make a yield from. In that sense, it's a luxury
• 11:01
  Speaker 2: product as well as being a utility product. It's both things,
• 11:06
  Speaker 2: and that's something that can make the price high. And
• 11:07
  Speaker 2: then you know, there is argument about whether the tax
• 11:10
  Speaker 2: relief has pushed up the price of land or not.
• 11:13
  Speaker 2: I might say it probably has, because it certainly pushed,
• 11:15
  Speaker 2: as you say, the Clarksons and the Dysons into the
• 11:17
  Speaker 2: business by land. And there is a conversation about the
• 11:21
  Speaker 2: extent which the subsidy system changes the price of land.
• 11:25
  Speaker 2: You know, did the price of land in the UK
• 11:27
  Speaker 2: start going up when the European agricultural substy system was changed,
• 11:31
  Speaker 2: such as subdies were paid per acre as opposed to
• 11:34
  Speaker 2: whatever it was before, which I can't quite remember refred
• 11:36
  Speaker 2: So there was a change there, and the price of
• 11:39
  Speaker 2: land did look like it started to move then. And
• 11:42
  Speaker 2: the other thing to ask is just you know, as
• 11:43
  Speaker 2: a price of land in the UK is simply a
• 11:45
  Speaker 2: function of the everything bubble. You look at a graph
• 11:48
  Speaker 2: of land prices, they definitely do start go up before
• 11:51
  Speaker 2: interest rates started to fault dramatically, but they go up
• 11:53
  Speaker 2: a lot faster as we move into the zero interest
• 11:57
  Speaker 2: rate world, so it's part of the everything bubble at
• 11:59
  Speaker 2: the same time.
• 12:00
  Speaker 1: Yeah, between two thousand and two thousand and seven, they
• 12:02
  Speaker 1: these rocketed and because I guess the other issue is
• 12:05
  Speaker 1: the commodities bubble was around the then as well, and
• 12:08
  Speaker 1: they seem to have gone up a lot with the
• 12:09
  Speaker 1: kind of soft commodities bubble because they didn't die much
• 12:12
  Speaker 1: in two thousand and eight, which was interesting.
• 12:15
  Speaker 2: So there's a lot going on here and this this
• 12:18
  Speaker 2: change to the tax rules seems like a bad thing.
• 12:20
  Speaker 2: I can't see the government backing down because you know
• 12:25
  Speaker 2: it looks so bad already, why would they make it worse.
• 12:27
  Speaker 2: But between us, John, we have just given them a
• 12:29
  Speaker 2: way out. Rachel Reeves, we've offered you a way out.
• 12:33
  Speaker 2: Take it, save yourself. Right, What else should we talk about, John?
• 12:36
  Speaker 2: To wet inflation because this isn't going to do anything
• 12:39
  Speaker 2: for that.
• 12:39
  Speaker 1: Yes, it's not going to do anything for that. Well
• 12:42
  Speaker 1: inflation inflation. Inflation data just came out this week and
• 12:45
  Speaker 1: it came in a little bit higher than everyone was expecting.
• 12:48
  Speaker 1: Two point three percent to two point two percent. Is
• 12:53
  Speaker 1: it's not so much a big deal in itself. It
• 12:55
  Speaker 1: just points to interest rates staying higher for longer. And
• 13:01
  Speaker 1: you know the Bank at England it's interest because I
• 13:04
  Speaker 1: mean Andrew Bailey about six weeks ago, after the FED
• 13:07
  Speaker 1: had cut interest rates by half a percentage point, he
• 13:09
  Speaker 1: was kind of like, oh, we we might need to
• 13:11
  Speaker 1: get more aggressive about this. But he very quickly changed
• 13:14
  Speaker 1: his tune because you know, the US data keeps coming
• 13:17
  Speaker 1: in quite nicely and UK inflation is now likely to
• 13:21
  Speaker 1: be hitting three percent at some point next year, so
• 13:24
  Speaker 1: it can be very hard for them. They do very
• 13:26
  Speaker 1: much with interest rates except lower them very gradually, and
• 13:32
  Speaker 1: I think the biggest impact from that is that the
• 13:34
  Speaker 1: housing market is probably going to stall again because mortgage
• 13:39
  Speaker 1: rates are going back up. They dipped to about as
• 13:43
  Speaker 1: they got almost as low as about three point eight
• 13:44
  Speaker 1: percent earlier this year for a five year fix. Now
• 13:47
  Speaker 1: you can't get a five year fix for below four percent.
• 13:51
  Speaker 1: And I was seeing an email from Ellen c told me.
• 13:55
  Speaker 2: That this morning.
• 13:56
  Speaker 1: So yeah, I think that I think they has you know,
• 14:03
  Speaker 1: been kind of like up beating the UK economy roughly
• 14:06
  Speaker 1: since everyone was panicking about it back in twenty twenty two.
• 14:09
  Speaker 1: But Noel job well going back off a but it
• 14:12
  Speaker 1: just feels as if it's getting you know, everything's looking
• 14:15
  Speaker 1: as if it will stole. Consumers are getting slapped around by
• 14:18
  Speaker 1: the government. It's not really uh an environment that feels like,
• 14:24
  Speaker 1: you know, let's go, let's go for growth.
• 14:26
  Speaker 2: Yeah, but listen, here's your regular reminder that there is
• 14:28
  Speaker 2: no correlation oncesoever, between a country's GDP and performance fix
• 14:32
  Speaker 2: stock market.
• 14:32
  Speaker 1: True.
• 14:34
  Speaker 2: Do see, we're not going to talk about the UK
• 14:36
  Speaker 2: stock market now, but putting a link in the show
• 14:38
  Speaker 2: notes that you should click on that talks about the
• 14:40
  Speaker 2: UK stop market and why it might just be a
• 14:42
  Speaker 2: global safe haven at the moment. Thanks for listening to
• 14:49
  Speaker 2: this week's Marrion Talks Money debrief. If you like us show, rate, review,
• 14:52
  Speaker 2: and subscribe wherever you listen to podcasts. Also, if you
• 14:54
  Speaker 2: short to follow me and John on ex or Twitter
• 14:56
  Speaker 2: at marinus w and at John Underscore stepic this episode.
• 15:00
  Speaker 2: It was produced by some Asadi, Production support and sound
• 15:02
  Speaker 2: design by Moses and Questions and comments on this show
• 15:05
  Speaker 2: and all our shows are always welcome. Our show email
• 15:08
  Speaker 2: is Mere Money at Bloomberg dot net. Want to do
• 15:11
  Speaker 2: some episodes of Marin Talks Money ad free, Become a
• 15:14
  Speaker 2: Bloomberg dot com subscriber today. Check out our special intro
• 15:17
  Speaker 2: offer right now at Bloomberg dot com Forward Slash Podcast offer,
• 15:21
  Speaker 2: or click the link in the show notes that seems easier.
• 15:24
  Speaker 2: You'll also unlog deep reporting data and analysis from reporters
• 15:27
  Speaker 2: around the world. If you're already at Bloomberg dot com subscriber,
• 15:30
  Speaker 2: connect your account within Apple Podcast to listen to this
• 15:32
  Speaker 2: episode ad free.