Windfalls but no cider

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. On one year, because the rain came at the wrong time and then 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.

But the thing with agriculture is that if everybody has a poor crop, prices go up. People do genuinely want to eat. If everybody as 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.com. A free newssheet.  But 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 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 taken into account. If you pay windfall taxes in good years, surely you ought to be entitled to a bailout in bad years? After all, 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, 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 down 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. For example, MPs are going to get a £2,212 a year wage increase? Why, it’s not due to better trading practices or greater efficiency. Let’s slam a windfall take to that particular group of profiteers.

Actually, 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 of a lot of the 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 what they’ve gained over the past decade or so.

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

When the whole thing kicked off, the assumption was that the Russians would win in a week and then EU and other politicians would go back to sucking up to Putin again, so why change anything? You can understand the reluctance of a bureaucrat to do anything or change anything under the circumstances.

Then when it didn’t last a week but instead went on for three months, the assumption seems to have remained that it was soon going to be over. The problem our various lobbies and bureaucracies have now is that it could last for years. Even if the fighting stops, I cannot imagine any electorate within the UK or EU being happy to just go back to the old ‘let’s get cosy with Putin.’ Also the war crimes investigations have started. They’re a bit like the mills of God. They grind slow but they grind fine. No politician wants to be the one who flies to Russia to re-establish a trade deal only have social media to erupt with a horror story of yet another newly discovered massacre. It’s probable that the current Russian administration are very much beyond the Pale. We will do a deal, but we’ll do it with successors who have hung their predecessors out to dry and have handed them over to the courts.

But this still leaves the problem that bureaucracies, and lobby groups with a powerful personal vested interest, are not going to change course unless somebody grabs the helm with a firm hand.

It’s noticeable that Boris has been very quick to take major foreign policy decisions, promising military support to Sweden and Finland for example. Given he was Foreign Secretary it’s possible he knows people (especially within the civil service) and knows who to go to for the right briefing. Also he has nothing to lose really. Politically he will not survive as PM just following a policy of ‘steady as she goes.’
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 which will 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 world wide 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. People will get hungry.

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.

♥♥♥♥

There again, what do I know? Ask an expert.

 

 

As a reviewer commented, “Amusing, sometimes touching and always witty. An absolute treasure of a book, guaranteed to put a smile on any readers face. Jim records country living in short ,sharp stories. Great for a ten minute read whenever convenient but one tale leads to the next and soon half an hour will pass. Top work”

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25 thoughts on “Windfalls but no cider

  1. rootsandroutes2012 May 13, 2022 at 4:15 am Reply

    Thank you Jim – at last a bit of sense.

  2. Eddy Winko May 13, 2022 at 5:20 am Reply

    I remember that the last time oil was close to $120 in and around 2014 and the price at the pump reached 5.50 zloty (£1) a litre. Now I appreciate that the cost of refining must have increased in that time, but we are now close to 8 zloty a litre, so I do wonder if the oil companies are profiteering a little more than they should?
    Still a governmental nudge to make them invest in much needed renewables would be better than a windfall tax.

    • jwebster2 May 13, 2022 at 10:32 am Reply

      That’s my feeling as well to be honest

  3. Alicia Butcher Ehrhardt May 13, 2022 at 8:22 am Reply

    For a non-expert, you sure have thought a lot about things – and made a balanced argument against a windfall tax. You make more sense than the politicians.

    • jwebster2 May 13, 2022 at 10:34 am Reply

      Ah, but I don’t have to convince people to vote for me 🙂

      • Alicia Butcher Ehrhardt May 13, 2022 at 10:54 am

        And I’m not in a position to vote for you, being of a foreign persuasion.

      • jwebster2 May 13, 2022 at 11:23 am

        Interesting sometimes Americans seem more foreign than others and at some times a lot less foreign 🙂

      • Alicia Butcher Ehrhardt May 13, 2022 at 9:19 pm

        We’ve know each other online a long time now – hope to meet in person some day.

  4. Words on Paper May 13, 2022 at 9:15 am Reply

    Speaking of experts, why aren’t countries being run better? As you say, it isn’t rocket science, housewives (and farmers, I suspect) could do better with one hand behind their backs…

    • jwebster2 May 13, 2022 at 10:34 am Reply

      I suspect the little people often see more clearly

      • Words on Paper May 14, 2022 at 7:53 am

        Pity they aren’t running the country…

      • jwebster2 May 14, 2022 at 8:15 am

        They cannot be trusted to ensure that the ‘right’ people get the plum jobs and the index linked pensions 😦

  5. Dan Holdsworth May 13, 2022 at 10:30 am Reply

    To my mind, one facet of what is going on is that the internet allows a relatively small number of people to make a hell of a lot of noise, and also allows these blowhards to be situated anywhere in the world. Politicians respond to noise, and the more noise you get, the more reaction you get.

    What is needed is some form of secure and effective online identification system, possibly coupled with a reputation scoring system. This would then mean that someone who goes around bad-mouthing companies and restaurants and the like for fun will rapidly gain a very poor reputation, one which they will be unable to shake other than by winding their neck in somewhat. Such a system would bring sanity to online reviews if nothing else.

  6. Bridgesburning Chris May 13, 2022 at 3:30 pm Reply

    That’s a lot of information for a non-expert. I learned something new! Thank you!

    • jwebster2 May 13, 2022 at 4:19 pm Reply

      I try, or at least I’m very trying 🙂

  7. Jack Eason May 15, 2022 at 7:40 am Reply

    Reblogged this on Have We Had Help? and commented:
    More from Jim…

  8. OIKOS™- Art, Books & more May 16, 2022 at 3:06 am Reply

    Thanks for these very interesting and highly important thoughts, Jim! I just keep asking myself why grain production for Africa had to be outsourced to the Ukraine. One could have helped the people in Africa sustainably with solar-assisted multi-water desalination plants and pipelines. Both would have been possible, but of course Africa isn’t about the people, it’s about the raw materials. The more dependent you keep people, the more willing they are to dig cheaply. ;-/ Best wishes, Michael

    • jwebster2 May 16, 2022 at 4:54 am Reply

      Also it’s about political stability as well. Friends of mine are Nigerians of my age. They remember before the oil when Nigeria was a major agricultural producer. They were one of the leading producers of palm oil and other products.
      Then the oil came, now, they’re importers of many food products.
      Nigeria may split up as allowed under the constitution.

  9. Cynthia Reyes May 16, 2022 at 2:12 pm Reply

    As always, your posts are thoughtful and thought-provoking. You link the challenge of being a farmer with the invasion of Ukraine and the connection to international climate change resolve and bring it back to the issue of the supply of food. Covid, climate change, Putin’s war – they all have been huge reminders of how connected the world is today. The flap of the butterfly’s wings…

    • jwebster2 May 16, 2022 at 2:19 pm Reply

      Somebody ought to do something about that damned butterfly 🙂

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