Capital Grants (Hansard, 27 October 1970)

§ Mr. Prior

The Government have decided to introduce a single, unified, Farm Capital Grant Scheme which will replace a wide variety of existing schemes providing assistance to farmers and landowners for capital investment in agriculture. In the new Scheme (to be made under powers provided by the Agriculture Act 1970) the procedure and conditions of grant are standardised and a number of present restrictions are removed in order to make more productive use of the grants. The Scheme will not cover plant and machinery, which will qualify for new tax allowances announced today by the Chancellor of the Exchequer. The necessary Orders will shortly be laid before Parliament and, subject to Parliamentary approval, the new Scheme will come into operation on 1st January, 1971.

The Scheme has been prepared in consultation with the Farmers' Unions and the landowners' organisations.

Apart from plant and machinery, the Scheme will assist expenditure at present covered by the Farm Improvement Scheme, the Hill Land Improvement Scheme, the Field Drainage and Farm Water Supply Schemes, the ploughing, orchard grubbing, and and scrub clearance grants, and the agricultural investment grants on fixed equipment and long-term improvements. It will also incorporate the grants for remodelling works and improvements at present provided under the Farm Amalgamations and Boundary Adjustments Scheme. As already announced, the investment grants on tractors and self-propelled harvesters will end when the new Scheme begins. When investment allowances were ended in January 1966, an additional element was introduced into certain of the capital grants for agriculture to compensate for the loss of benefit to farmers.

As announced by the Chancellor of the Exchequer in the House of Commons today, investment grants for industry generally are terminated with effect from today and replaced by improved tax allowances. Farmers will benefit from the new tax allowances and, in consequence the Scheme will not provide grants for expenditure on plant and machinery except in a few instances where items of plant or machinery form an integral part of works included in the list of eligible improvements.

Plant and machinery purchased (i.e. paid for) after 31st December, 1970 will not be eligible for the agricultural investment grant on fixed equipment or the grant on tractors and self-propelled harvesters. Applications submitted by 31st December, 1970 for approval to proposed expenditure on fixed plant and machinery under the Farm Improvement Scheme and Farm Amalgamations and Boundary Adjustments Scheme will however continue to be dealt with as at present under those Schemes.

Horticultural improvements will continue to be assisted by the Horticulture Improvement Scheme which is dealt with in a separate announcement.

Grant Rates and Condition

The standard rate of grant under the unified Farm Capital Grant Scheme will 9W be 30 per cent. and there will be higher rates for certain classes of work as follows:

i. Field drainage: 50 per cent.;
ii. Remodelling works and facilities consequent upon approved farm amalgamations and boundary adjustments: 50 per cent.;
iii. Specified works or facilities for the benefit of hill land: 50 per cent.;
iv. Field drainage for the benefit of hill land: 60 per cent.

But initially the standard rate and the special rates will be increased by 10 per cent. until 18th March, 1972 in conformity with the announcement made following the 1970 Annual Review.

To qualify for grant, expenditure must be incurred on an eligible item and for the purposes of, or in connection with, an agricultural business. It must be of a capital nature; works and facilities of an inherently short-lived or temporary nature will be excluded. In general, the business must be capable of yielding a sufficient livelihood to a reasonably skilled occupier after the investment has been made. However, businesses too small to meet this requirement will be able to obtain grant on certain items—for example, field drainage, farm water supply, fencing and land reclamation—provided these would continue to be of benefit if the holding were subsequently amalgamated.

The tests of prudency, and of the worthwhileness of the investment, at present applied to some classes of application, notably under the Farm Improvement Scheme, will be discontinued. With certain exceptions, however, the investment will have to meet a test of technical soundness, in respect of such matters as design, construction and siting of fixed equipment.

There will be a general requirement that the cost on which grant is being claimed is not unreasonable for the work done.

Limitation of Grant

Grant will not be paid on any application which covers less than £100 of eligible expenditure, but the minimum may be made up of expenditure on several items.

Buildings for stock that depend mainly on purchased feedingstuffs will now be 10W eligible, but there will be a ceiling of £100,000 on the total amount of grant-aided expenditure in respect of any single farm unit in any two-year period. Expenditure which has qualified for the higher rate of agricultural investment grant introduced on 19th March, 1970 will count towards the ceiling.

Level of Expenditure

When the former investment allowances were ended an additional element was introduced into capital grants for agriculture. The level of expenditure on these grants will be somewhat reduced in consequence of the Government's decisions, but farmers will benefit from the new tax allowances. Otherwise the introduction of the new Scheme is not intended to alter the total level of grants but to use them more productively. The Scheme will be kept under review in the context of the Government's general agricultural policy and in order to ensure that these two objectives are being achieved.