After years of talking about the need to prioritise active farmers, and the need to disincentivise armchair farming, we finally have some proposals relating to leasing of entitlements (see page 1).
Are they enough? To be blunt, no. I’m reminded of Pulp’s classic song Common People, “I had to start it somewhere, so I started there”. It’s a start.
The Department of Agriculture has started by introducing an amnesty on the clawback on entitlements sold in 2023 and 2024, presumably to encourage people no longer farming to sell entitlements rather than lease them ad infinitum.
I’m not sure it will work. As it is, entitlements leased long-term with leased land are eligible to benefit from the tax exemptions that apply in such transactions. A proposed 10% clawback on shorter-term leases won’t derail that train.
The ICMSA has reacted negatively to the proposals on the table, saying they fall short of the ambition expressed by everyone for active farmers.
Expect the other farm organisations to be similarly underwhelmed. The big question is, does anyone have any bright ideas on what can be done?
One option might be to transfer the tax incentives from entitlement leasing to entitlement sale. Increase the clawback on leased entitlements, so people are encouraged to sell if they are not farming.
The desire of families to hold on to entitlements for the next generation can be tempered by the creation of a national reserve that can hand entitlements out to new entrants.
A meaningful clawback would augment the 3% of Pillar I now being devoted to a reserve. Of course, there would be a necessity to safeguard against a cute hoor like me selling my entitlements this year, trousering the money, and then having Dealer Óg coming along next year and getting free entitlements from the reserve as a new entrant.
That caveat aside, now might be the time to change. There was a time when farmers were loath to permanently part with high-value entitlements, but as we converge toward full flattening, that becomes a redundant concern.
The other giant can of worms that no one has yet confronted is existing leases and how they will evolve as entitlements are radically changed by the reforms as proposed by Minister McConalogue.
A leased entitlement currently worth €400 will only effectively be worth €240 in 2023. Can land leases with entitlements attached be reviewed? This could fundamentally alter their value.
Will such leases be reneged on, particularly ones that might have seven or more years to run?