330

SOME FEATURES OF FARM BUSINESS STRUCTURES ALAN HARRISON University of Reading

This paper presents a preliminary summary of some contemporary features of farm business structures as these have emerged from a fairly comprehensive survey of a stratified random sample of the farms of Buckinghamshire.

The sample was drawn from the list of addresses relating to the official agricultural returns for June, 1961, and, as Table 1 shows, a 94.3 per cent response was obtained. Each holding in the sample was visited in the period March, 1963, to January, 1964, and information was obtained about the farm business-its size in terms of acres and capital invested; the pattern of resources within that overall investment; the associated structure of liabilities; other income-yielding occupations; the farmer’s business career; his social and educational background; land tenure; proprietorship; in short, a broad coverage of the many ways in which business size, available resources and entrepreneurial capacity were balanced against family and other demands, personal assets and production possibilities.

The aspects of farm businesses singled out for presentation and comment in the following three sections may be conveniently grouped under the headings of size pattern, tenure and proprietorship, and finally, assets and liabilities. Some restrictions were placed on the choice of material by the stage the analysis had reached by the time it was necessary to go to press. Further reference to the preliminary, tentative and to some extent exploratory nature of the present study is given in the final section which sets it in its broader professional and methodological context.

I First, the size of businesses. The relevant data are set out in Table 2.

This table is in two sections. The first section shows the size (acreage) distri- bution of Bucks holdings according to the official statistics for 1961. The second section shows the corresponding distribution of Bucks farms which visits to the occupiers of holdings revealed. The discrepancy between the numbers of holdings and the numbers of farms is explained, to a large degree, by the fact that the basic unit of the agricultural census-the holding-is not necessarily identical with the basic economic decision making unit-the farm- with which this study is concerned.*

For our purposes, a separate business unit or farm,is defined so as to embrace such farming activities as fall within the compass of a given fund of capital. But it is not enough that a single person owns a number of establish- * Attention has frequently been drawn to the fact that a number of holdings-pieces of

land for which the Ministry obtains separate census returns-may be run together to form one unitary business. In a full enumeration with precise identification and recording of associated holdings then the step from holdings to farms is a fairly straight- forward matter of arithmetic. Where sampling is employed, however, a more subtle problem of double counting arises. Questions of prime methodological importance are raised which call for refined statistical treatment. References here do no more than outline the issues raised.

Some Features of Farm Business Structures 33 1

ments and that he should allocate capital between them, on a more or less continuing and regular basis. To count as a single business unit, there must be participation in a regular and at least annual assessment of the capital position with all sectors contributing to, and competing for, resources. Machinery may be used partly in common and other physical interlocking of enterprises is likely. Accounts will generally be presented so as to facilitate capital allocation, though they may not be presented in a single set. Distance will not be, in itself, a criterion. It may well assist, however, in the assessment of the main criterion, namely, that investment opportunities a t the Merent establishments should be borne in mind in the allocation of capital each year and that each sector should contribute all its surplus to that central fund.

In accordance with this central notion of a farm, the farmer is defined as the person who is ultimately responsible for making decisions about the allocation of capital-its directions and rates of flow. It follows, therefore, that it is permissible, on occasions, to talk about a farmer, although strictly the business being examined is a private company. (See Notes to Tables and Table 5.) I t follows also that, in some cases, farmer and tenant may not be the same person. Complex family arrangements of tenure, management and finance were discovered in Bucks, for example, where brothers were farming in an effective, though not necessarily legal, partnership. The same criterion of capital allocation was applied, just as if the unit were an ordinary family farm. In such cases, however, it became very important to make careful note of the number of dependant families involved.

The figures of holdiflgs and of farms given in Table 2 show that the official statistics tend to overstate the number of smaller business units (the number of holdings under 300 acres exceeds the number of farms by 421) and to understate the number of larger businesses units (the number of farms over 300 acres exceeds the number of holdings by 52). Both sets of figures, however, shew the preponderance of the small unit in the county structure. Thus, the classification of the 2,446 farms given in Table 3 shows that over one-half are less than 100 acres each and occupy little more than one-eighth of the total area. About one-fiftieth are over 700 acres each and take up almost one-sixth of the total area. The preponderance of the small firm is further emphasised when size is measured in terms of capital employed. (See Table 7).

Of the 2,460 farms in Bucks in 1962, 1,448 (59 per cent) had a total peak investment that year in all resources including land (where owned) and working capital, of less than Ll0,oOO each. This sum covers farm house as well and so adds to the inherent attractiveness with which farming as an occupation has been traditionally regarded.

Farming is not the only sector of the economy with this sort of structure. It cannot be said, with any certainty even, that it attracts more than its fair share of small scale entrepreneurship. On the other hand, it may well be that agriculture, along, for example, with retail trades, services and building, is part of an important, though probably declining, sector of the economy in which an independent business can operate on a very small scale.

The presence of such a high proportion of small scale businesses is the result, probably, of a low overall rate of return on capital which, in turn, has led to a small surplus, from which further investment in capital might take place. On the other hand, farming finds itself with no shortage of recruits and, while little has been done in the way of systematic and comprehensive study, there are signs that, among such businesses, risks are high and that a high business mortality rate is the corollary of a high birth rate. Nevertheless, there is also increasing evidence-here and in the U.S.A.-that, in spite of

332 Alaiz Harrison

the low available surplus from which investment niiglit be made, farmers achieve a saving and investment rate which is high compared with that achieved in the rest of the economy. It would seem that it is the firm-investment aspect, not the family-consumption aspect, which is dominant in the family- firm complex. The constant presence of investment opportunities results, probably, in the family sector receiving a smaller share of income for con- sumption than might otherwise be the case and not vice versa. One can only guess a t the differences in values and in social and economic environment which seem to be a continuing feature of perhaps the majority of farm businesses. It may be wondered, however, whether they will persist as the standard of living of the economy as a whole rises. Security of tenure has an important bearing on this issue and reference is made to it in Section 11.

In view of the small scale operation and the relatively low returns which result, it is hardly surprising to find that a high proportion of farmers have other, income-yielding, occupations.*

Of the 2,401 individual business proprietors, 991 (41-3 per cent) were part- time operators (See Table 5). I t was possible to form a rough estimate of farming and other income and place them into three groups according to whether farm income was less than, roughly equal to or greater than, that from other occupations. Only 64 of the 991 were estimated to have a farm income greater than, and 181 approximately equal to, income from other occupations. The other 75 per cent had another source of income greater than that from tlieir farm.

These part-time farmers are far from forming a homogeneous group, however. Socially, and in income terms, they fall into a bi-modal type of distribution with a professional (relatively-high-other-income) group making up the larger peak, and a manual worker (relatively-low-other-income) group making up the smaller peak. With these farmers especially in mind, it must not be imagined that because other income is greater than farm income, it is therefore a high income. Preliminary checks suggest this is far from being the case.

Six hundred and twelve (62 per cent) of the part-time farmers were either members of some profession or were employed as executives in town businesses. Bucks, with its high proportion of part-time farmers in the residentially desirable south who work in London, may not provide a good indication of the nature of much part-time farming in the rest of the country. Nevertheless, this type of farmer seems to feature increasingly in an industrial economy and may well spread to other areas, particularly where better transport facilities for commutors become available.

It is frequently suggested that measures to encourage part-time farming should be incorporated into agricultural policy. Part-time farming in Bucks can be examined with this in mind. A number of points emerge. First, of the farmers on less than 100 acres and who could, therefore, be expected to be the chief objects of such policy, over half were already farming on a part-time basis. Second, there is little evidence of changing from part-time to full-time

In applying this definition of a part-time farmer state pensions of those of appropriate ages weie not listed at all. I n addition some small rentier type incomes were un- doubtedly missed. In basing its criterion on the occupier the study follows, thcrcfore, the pion:ering work of Thomas and Elms in the same county in the 1930’s. This definition of part-time farmer must not be confused with that employed elsewbere, namely, someone on a holding with a work rating, in terms of man-days, below a certain level.

Some Features of Farm Business Structures 333

farming and vice versa during a fanner’s career. Only ten farms-of less than five acres each-made such a change in 1963. Moreover, only 371, or roughly one-seventh of the total number* had ever made such a change. 192 were part-timers who had at some time been full-timers; 179 were full-timers who had been part-timers.

To assist in the classification of these part-time farmers into more homo- geneous groups, in terms of likely response to changes in their economic environment, three points can be made at this stage. First, some are both able and willing to invest heavily in farming. Second, a high proportion are residential farmers who are, as farmers, effectively consuming their income from other sources-frequently on a relatively low scale, though not always so. Third, their reasons for entering farming are frequently complex and the influence of the profit incentive not easy to establish. Accountant-determined farm income is often, if not generally, an inadequate guide to the range of satisfactions which farming yields. There are, in particular, tax avoidance possibilities and, certainly important, the estate duty concession on farm property. The setting up of a logically acceptable set of relationships between these variables must await further study. It might, however, make excessive demands at this stage on the willingness of farmers to co-operate.

I1 This section concerns proprietorship and tenure. Over 94 per cent of farm

businesses were either sole proprietorships or partnerships which, since they were almost always close family arrangements, had a business significance not materially different from that of the sole proprietor. (See Table 4). Company operation was on a relatively small scale, though of growing importance. In 95 out of the 119 private companies, however, the entrepreneurial structure was closely akin to proprietor ownership and operation. Although 11 farms were operated as parts of public companies, not one parent concern was engaged solely, or even in the main, in direct commercial farming.

There is no evidence as yet that the formation of farming companies is being employed in order to broaden materially the area of capital recruitment. Such increase as has taken place would seem to be mainly the result of taxation issues within the family. The broad incidence of tax legislation would not seem to be particularly favourable, on balance, to private company formation and operation in farming.

The evidence, so far, on developments in tenure bears out the increased, and probably still increasing, owner-occupation of this century. Thus, of 2,446 commercial farms 973 (40 per cent) were entirely under owner-occupation, 861 (35 per cent) entirely rented and 612 (25 per cent) in part rented and in part owned. (See Table 3).

Two aspects of tenure call for further comment. First is the lack of national statistics relating to land ownership and land tenure. Here, as in other sectors of farm finance, the use of a seemingly firm descriptive term-the landlord- tenant relationshpcovers up a complexity of relationships-legal, social, commercial and other-and has probably lulled us into thinking we understand something we do not. For example, although only 3.8 per cent of land in Bucks was under grazing tenancies, they were, nevertheless, an important feature both of total tenancies and of rented acres (7.7 per cent). The virtual exclusion of this category from studies of tenure is a serious omission. Such tenancies featured prominently in overall adjustments of land inputs among farmers. * This figure accords closely with the findings of an earlier study in the South. See “Some

Aspects of Capital Investment on Farms” in The Favm Economist. Vol. IX, NO. 9, 1980.

334 Alan Harrison

The greater flexibility of rented land in resource adjustment is reflected in the fact that of 395 instances of acreage adjustment in 1963, 210 involved rented land and only 185 involved owner-occupied land.

In spite of the instructions given to them, tenants frequently omit land held under grazing tenancies from their census returns. This is a significant factor, therefore, in explaining cliff erences between holding and farm statistics. Such tenancies are generally small and, in addition to being seasonal, are also short-term ones, for they are mobile from year to year between tenants. On the other hand, they are probably no more mobile between landlords than is other land. Land let as grazing is frequently of relatively minor importance to its owner so far as its agricultural value is concerned and, as a consequence of this, there are signs of significant market imperfections in the form of wide price divergencies both between landlords and between tenants for comparable pieces of land.

The second aspect of tenure which the figures highlight concerns motiva- tion. This, in turn, has two distinct features. In the first place, renting-the hiring of capital resources-enables a farmer to obtain control over more capital than any other way. In Bucks, investment in land was, on average, over two and a half times investment in other farm assets. The historical importance of this scale, or gearing, factor has frequently been remarked upon. Now that the area of rented land is reduced, however-only 43.6 per cent of land in Bucks in 1963 was let on full agricultural tenancies-compensating adjust- ments in resource patterns and credit institutions would seem inevitable.

I t is the second feature of tenure which is frequently overlooked, however, its effect on security of expectations and the possibly seriously distorting effect which it can have, under certain circumstances, on the allocation of resources both in space and time. This is to take up again the point raised in Section I on the relationships between family and firm in farming.

The importance of any theoretical issues which it raises can be gauged from the figures showing the sex and marital status distribution of farmers. (SeeTable 6). Of the 2,401 individuals, 1,998 were married (1,900 males and 98 females). Overall, 2,223 were males and only 178 females. 13-6 per cent were partnerships-generally husband and wife or brothers. Bucks is probably no exception in that its farm firms are family firms.

Capital formation in farming is often the result of savings and investments over periods of years and, in some cases, of generations. For an individual farmer to be able to take a view of production possibilities, over time, which balances the various opportunities in a rational manner, security of use and secure enjoyment of the fruits of effort are vital. Similar considerations affect not only the deployment of money income but, the disposition of family labour time, both between the firm and the family, between work and leisure and between short and long term investments.

Any tenure agreement is likely to present some sort of compromise between the interests of landlord and tenant and, consequently, result in varying degrees of unfairness and resource misallocation under changing circumstances. To point out that recent changes in tenurial conditions can have serious effects on the allocation of farming capital, however, is neither to say they are desirable nor undesirable.

The landlord-tenant system in this country has long been unique in several respects. Both system of government and public conscience alike permitted its establishment, 114th little regard for any social costs it involved. The result was that, together with the gearing factor already referred to, it not only set up a pattern of businesses which was for some two centuries appropriate to

Some Features of Farm Business Structures 335

available technology and the role of farming in the economy as a whole, but which, even now, is exceptional among the farming communities of the old world. Moreover, it never attached any semblance of social stigma to renting. In addition, it granted tenants an exceptional measure of security of tenure.

The fact that 37.1 per cent of Bucks farmers were over 60 years old reflects this security of tenure to some extent. There are signs, nevertheless, that the sort of continuity of tenure which, in the past, lasted from generation to generation is no longer a material part of farm renting. Consequently, the significant part which tenants contribute to fixed and longer term capital formation, is being weighted towards the short and medium term. In the second place, while the general tenor of legislation under the Agricultural Holdings Acts, setting out the law governing landlord-tenant relationships, and the general economic pressure to which landlords have been subjected may have been socially acceptable, nevertheless, so far as landlords are concerned, things may have gone so far as to cause them to alter their traditional role. One of the more significant factors for change which the study revealed was .he high proportion of farmer-landlords who were taking land in hand. Although only 156 farmers increased their acreages in 1963, 15 of these were farmer-landlords taking land in hand. A further check revealed that over a half of the farmers who were also landowners were pursuing policies to this end. Such changes usually take the form of relatively large scale adjustments involving whole farms. This was the case in 1963 when some 2,000 acres were involved. Moreover, perhaps the majority of landlords played no active managerial role in their tenants’ investment proposals and it was quite the exception for a rental increase to be levied in return for the provision of additional fixed equipment by the landlord. A further related point, which calls for more detailed study, is the evidence of trafficking in land which takes place because of the 45 per cent alleviation of estate duty which is granted to agricultural land.

But, if the declining importance of farm renting has significant, though perhaps not easily calculable, implications for the business structure of farming, it seems equally certain that increasing owner-occupation has also significant, though differing, implications within that same field. Primarily, this raises the issue of capital transfer, especially concerning the process of inheritance. This is not a new issue but the transfer of a problem from one social class to another-from the old landlords to the new owner-occupiers. The restriction of estate settlement and the practice of primogeniture may, in the past, have helped to maintain estates at their customary size in terms of land. On the other hand, it probably aggravated the financial problem of transfer by increasing the number of dependants, especially dowagers, while, a t the same time, it restricted the flexibility of use of land-frequently the chief asset. On entry, it was not unknown for an heir to be left with only a small proportion of gross estate income, after meeting all obligatory settlements on other dependents. I t is a problem that owner-occupiers are only now having to face as the windfall gains of one generation, many of whom bought as sitting tenants, are reaped as a capital formation problem by the next who, except in the straightforward case of inheritance, must finance that gain in cash. Of the 973 owner-occupiers in Bucks in 1963,22 per cent had inherited, 23 per cent had bought as sitting tenants and 55 per cent had bought either with vacant possession or subject to tenancy.

On general grounds, the possibility of deficiencies arising in the timing, or the general business appropriateness, of inheritance cannot be entirely discounted. A number of medium and longer term developments seem likely; more corporate business so as to spread the incidence of asset ownership and

336 Alan Harrison

management participation; more private financing of farm mortgages by retiring farmers (a process known in the U.S.A. and Canada as financing by purchase contract); the appearance of a relatively new type of landlord who, though inheriting land and farm, more or less as a going concern, prefers to sell off working assets and let the land and fixed equipment. There are signs in Rucks, but no more than signs, of all three developments.

111 I t remains, finally, to examine some aspects of the overall structure of

assets and liabilities. As Tables 7 and 8 show, not only did farm-firms generally operate on a small scale, almost all their assets were owned. Of 2,460 farmers in 1962, no less than 1,364 (55.5 per cent) had no liabilities, other than those incurred in the general way of trade. A further 389 had liabilities amounting to less than 10 per cent of assets; 1,758 farmers, therefore, (71.3 per cent) had liabilities amounting to less than 10 per cent of their assets. Only 170 (6.9 per cent) had business liabilities amounting to more than 50 per cent of business assets. On average, liabilities amounted to L14 per acre. This represented only 11.7 per cent of assets (all working resources plus the value of owner- occupied land).

Unwillingness to borrow may frequently seem no more than a simple psychological aversion to debt but its frequently inarticulate and emotionally based nature should not blind us to the fact that, more or less intuitive as it may be, it is not necessarily the wrong assessment of the situation. To some extent, the need to seek credit to begin farming is reduced by the way in which family transfers often operate to provide a nucleus of working capital, either as outright gift or interest free loan. Moreover, where this occurs, there is often the strong possibility that repayment will never be sought. Such gifts or quasi-gifts are not restricted to parents but can extend to any relative by blood or marriage. An important part of the explanation of low borrowing by farmers would seem, however, to lie not in debt aversion or in family financing but elsewhere in the complex conditions which need to be met before credit is taken and business resources extended.

A t the heart of any proper assessment of an investment situation lie questions of physical productivities, prices, abilities and motives. Preliminary checks reveal how important motivation in particular may be and how little help some customary classifications may afford. Thus, while the 323 bachelors could be fairly readily grouped into those who were investing more capital in their farms and whose who were not, the latter were not all old nor the former all young. Old bachelors with a young relative to succeed them on their farms were among the most enterprising. Moreover, of the 47 individuals on farms of over 700 acres, 1 1 were bachelors and none aged. Among them were the most investment-minded farmers. On the other hand, advancing Years do seem to inhibit borrowing and investment, and, as Table 6 shows, no less than 62 per cent of the farmers in the county were over 50 years of age.

Usually a farmer is at one and the same time, manual worker, entrepreneur and financier. By training he is probably best fitted for the first and least well fitted for the third task. Full awareness of the role of credit in the economy generally, and the ability to assess its part in any individual investment programme, may often be lacking-but, even where it is not, then the benefits may not be thought to outweigh the uncertainty involved and any social stigma, which may still be attached to the use of borrowed funds. Awareness of such stigma was found in all social and entrepreneurial classes though it featured more prominently amongst those operating on a small scale and

Some Features of Farm Business Strztctures 337

ipplied particularly to merchant and hire purchase credit. Estimates of the latter may, therefore, be correspondingly low.

Where individual proprietorship prevails, as in farming, all the operator’s own capital is exposed to the risk of loss. When such a business expands by means of borrowed funds, then the chance of loss of its own capital increases. More precisely, as the level of borrowing increases relative to a given level of assets, so the spread between possible gains and possible losses expressed as a percentage of assets increases; moreover, not only does the spread increase but the distribution of possible losses and possible gains becomes increasingly weighted towards the former. The assessment of possible gains must frequently be low in relation to such inhibiting features. Borrowing will not then take place and such caution will be both understandable and proper. This can be expected even in an economically developed county of a developed community, as in the present case.

The high equity, or owner interest, type of financing reflects the un- willingness of farmers in general to embark on a high proportion of credit financed investment. Nevertheless, there may be sectors of the economy where risk has not been adequately discounted. The high proportion of bank lending calls for comment. (See Table 9). The fact that two-thirds of farmers’ liabilities are to the banks is the result of bankers’ willingness to accept business in the real estate mortgage sector, in spite of their clear and avowed deficiencies (chiefly their use of short call funds) to service this field. With rising land prices of recent decades lending errors must have been steadily and rapidly offset. Two features of the present situation give some cause for concern nevertheless. First, land prices are high in relation to overall levels of return in farming. So long as technological change and factor-product prices result in high marginal returns the high aggregate value placed on land by lenders may prove justified. Where average and marginal returns diverge so widely however, and where the medium and longer term movement of prices would seem to be more likely to be downward than upward, then relatively small changes in the levels of activity, in the purely farming sector of the land market, may result in a more than proportionate reduction in prices and in the aggregate value placed on farm land by lenders. Second, land prices are influenced by factors other than narrowly farming ones-social, industrial and commercial development, taxation factors are all relevant. But in some sectors such non-farm factors are probably of very great importance. And Bucking- hamshire would seem to fall, in part at least, within one of these sectors. Here, however, it seems clear that supply, if not demand, factors can be readily upset. There may be, for example, changes in legislation bearing on overall planning of land use, resulting in exaggerated effects on the aggregate assess- ment of land values by lenders. In the event of some significant recessive movement over extending of the banks in some sectors might be revealed.

The operator who owns a high proportion of his business assets is likely, on that score, to react conservatively to changes in his economic environment and hence to be more readily predictable. Only 6-9 per cent of the farmers in Bucks in 1962 had liabilities amounting to more than 50 per cent of assets, so there was little evidence of sectors where owner-interest had reached nominal proportions, thereby resulting in the excessive discounting of risks on the slim chance of heavy gains. Where risk discounting reaches these proportions prediction of farmer response becomes hazardous. There are reports of sectors in the U.S.A. where operator equity has reached nominal levels. It may bc true also of some sectors of underdeveloped economies.

The statistics of aggregate borrowing by the farmers of Bucks must await further analysis. Two preliminary points can be made. however. First, while

338 Alan Harrison

the dominant position of the banks is clear, the attempt to link these county and national statistics needs further information. A few years ago figures for one of the larger national banks revealed that, although it had about one-third of farmers as its customers, it had only one-fifth to one-sixth of total bank advances to agriculture. That riddle still awaits an adequate solution. Second, while the figure of merchant credit may seem low, it is in line with the findings of an earlier study.* Moreover, merchant credit is defined here as credit extended beyond that granted in the normal way of business. I t is, in other words, credit for which discounts are lost. Such figures as exist elsewhere would seem to have in mind the full total of trade debts by farmers. On the other hand, they ignore sums due by merchants to farmers in the ordinary way of business. In any case, statistics in this field seem to be fragmentary and ill-defined and to that extent badly fitted for the place they seem to play in the aggregate accounts of the price review mechanism. If the present figure of just over L207,000 is put, at a guess, a t 30 per cent of total trade debts by farmers to their merchants, then an estimate for the county of some €700,000 is obtained. This figure is somewhat less than the corresponding total of private and family credit-~778,lOO-though not nearly so much less as the current national estimate of merchant credit (~120,000,000) is of the current national estimate of private credit (~450,000,000). Moreover, it is not clear to what extent some liabilities within the family ought to be properly included in any aggregate figure of private credit.

On the other hand, this relatively low figure of private lending to farmers may reflect a genuine and economy-wide reduction in that sector. A certain type of lender has long operated-either directly or through solicitors or other agents-in the mortgage sector of the local farm real estate market. Perhaps such lenders are less readily available now. Their absence might reflect, to some extent, a certain broadening in outlets in the economy generally for such funds .

The purpose of this paper has been to present for discussion some of the preliminary findings of a specific study and to consider some of their implica- tions, thereby directing attention towards a somewhat neglected sector of agricultural economics. I t may not be inappropriate in this final section to examine the need for, and possibility of, further work. In the short term the study of capital structure calls for more precise and sometimes more easily manageable concepts and descriptions. Some long current, but ill-supported, figures and opinions need to be examined critically in the light of more adequate field data. And this in itself seems important enough. It embraces, for example, the need to satisfy the most basic welfare test of agricultural policy. H o w many farmers are there, and in what proportions do they share aggregate farming income? But description presupposes purpose. Ultimately that purpose must be ability to predict both in the aggregate and by sectors.

There may well be general agreement on the way that farming has changed in recent decades. Large reductions have been made in labour inputs, relatively small reductions in land inputs. There have been significant increases in physical capital and more especially in machinery, fertilizers, chemicals and other products embodying major technological advances. As contributory factors the nature of scale returns can be pointed to, as well as the high productivity and favourable price aspects of new resource substitution. The

* Harrison, op. cit .

Some Features of Farm Business Structures 339

favourable equity position of farmers has assisted the financing of such changes -particularly over the last two decades. The growing importance of owner- occupation has probably materially enhanced overall managerial capacity. The part played by managers map also be important. In Bucks in 1963, for example, there were 135 professionally trained managers to whom genuinely executive duties were delegated.

But large sections of this process of change remain virtually unexplored. The individual may see himself expanding output against an elastic demand for products. For farmers in the aggregate this is not the case. In the aggregate, a highly inelastic demand situation is found and the nature of this inelasticity needs further study. Moreover this is only part of a wide field-the study of how ability to predict on the micro level can be translated into ability to predict on the macro level. In this sector, techniques and data available at the micro level far outstrip those available at the macro level. And the gap between the two is in danger of becoming even wider.

Farmers are motivated in different ways and have differing demands made on them; they have different planning horizons; they differ in their abilities to finance courses of action and in their abilities to withstand unfavourable outcomes of those courses of action; they differ, therefore, in their abilities to withstand risks; they also differ in their reactions in the face of given risks; they acquire different amounts of capital in different ways and on different terms; they differ in the production outlets available in their particular environ- ments; they have different technical and managerial skills. These variables change with time. They are ill-defined and the causality between them imperfectly understood.

Under such circumstances field work must await the formulation of more adequate hypotheses and hypotheses await more adequate field work. This paper is offered as a small contribution towards the many and varied studies which are called for if progress is to be made in this field.

In the following Tables, figures of holdings are extracted from the Ministry’s list for Bucks for June, 1961. Other figures are based on field data obtained in 1963, raised in accordance with the sampling procedure set out in Table 1.

The following points should be borne in mind in interpreting the figures presented:-

1. The raised figures relating to holdings and farms in 1961 are based on the evidence of the farmers interviewed in 1963. In 74 cases they were not farming in Bucks in 1961 (raised figure).

2. No records were obtained for 166 holdings (raised figure). 3. Eighty-four farms included holdings in other counties which did not

feature, therefore, on the list of 2,989 holdings from which the sample was drawn.

4. In addition to the 2,446 farms in 1963, 74 holdings had let off all their land, 130 had land but were not engaged in farming and 4 were not occupied in 1963.

5. Figures for 30 farms of less than 5 acres each are included in the raised results for the 5-99 acre group.

6. Tables 7, 8 and 9, which deal with assets and liabilities, relate to the peak figures for 1962.

340

Over 700 acres

24 0.8%

100% 24

Nil

24 0.0%

Alan Harrison

TOTAL

2989 100%

562

32 5.7% 530

-

TABLE 1

STRATIFIED SAMPLE OF HOLDINGS (Bucks M.A.F.F., 1961)

Numbers of Holdings on County List ... ... ...

Sampling Percentages .. . . . . Numbers of Holdings in Sample ...

5-99 Size Groups acres

- I- 1770

59.2%

10% 177

(b) Estimated' number of

FARMS

1392

902

284

42

2620

Numbcrs of Usable Records

Numbers of Non-co-operators

DIFFERENCE between col. (a)

and col. (b)

+ 37H

+ 43

- 34

- 18

+ 369

TABLE 2

SIZE DISTRIBUTION OF HOLDINGS (Bucks M.A.A.F., 1 9 6 1 ) AND REVEALED DISTRIBUTION OF FARMS

Size Groups

5-99 Acres . . . ... 100-299 hcrcs . . . 300-699 Acrcs ... Over 700 Acres . . .

TOTAL ...

(a) Number of HOLDINGS

on County List

1770

945

250

24

2989

'The figures in this column are raised results after, first, discarding 169 holdings to eliminate double counting. second, discarding a further 200 holdings which were not farms, third, counting 166 non-co-operating holdings as farms.

TA

BL

E 3

DIS

TR

IBU

TIO

S A

CC

OR

DIN

G T

O T

EN

UR

IAL

ST

-IT

US

(2,4

46 F

arm

s B

ucks

, 19

63)

Ow

ner-

oc

cupi

ed

632

250 76

15

Size

G

roup

s Part

owne

d,

part

ren

ted

244

232

104 32

5-99

A

cres

...

100-

299

Acr

es

3004

99 A

cres

Ove

r 70

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Size Single Partner- Groups Proprietor ship

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100-299 Acres . . , 618 184

300-699 Acres . . . 164 74

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TOTAL ... 1,972 334

80-6'~o 13.6%

Alan Harrison

Private Company Other TOTAL

60 - 1,294

20 12 834

24 8 270

8 1 48

119 21 2,446

4.9% 0.9% 100%

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. . . . . . . . . . . .

S o w Features of Favat Busirtess Structures 343

I- 5 o x - 5 4A c- I - G B =

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9.9

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. ...

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(2,460 Farms. B

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, 1962)

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l

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pora

tion

Ban

ks

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e P

riva

te

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ily

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chan

ts

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L80 1,000

-

,Q40,800

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L113,800

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86,6

00

L364,lOO

L176,400

L251,400

L89.900

-

L556.700

L20.000

~10,000

-

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-

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%

12%

7%

7%

4%

3 Y

o

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L242.000

L63.000

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L46.500

L3,517,500

#326,200

L390.200

L387,900

~207,100

L160,300

L1.359.300

f E 0)

M

L586.700

r/l v f

100%

.a

L5.289.200

v) w z

318 Discussion oit illait Hiirriso fa’s Paper

DISCUSSION ON ALAN HARKISON’S PAPER. Nornrtztt Hicks :

First of all may I say how very interesting 1 I I J U I I ~ Mr. klarrison’s paper and I much appreciated his esposition of it. I am sure that when the full survey IS published it is going to be worth very close study; but having said that 1 now want to suggest it is important not to draw too many inferences from this p a p r alone. 1 say this because it seems to nie that only a regional pattern is recordcd here. Buckinghamshire is in the stockbroker belt. which has obvious financial implications.

I am quite sure you would find a very dillerent pattern in the West Country, especially for merchants’ credit. 1 notice that the definition is credit for which discounts are lust, which 1 think is misleading. The average mcrcliant‘s credit works out by this definition at L84 per farm. The Secretary of the National Association of Corn and Agricultural Mer- chants tells me that they have recently carried out a survey of merchants’ credits which

average credit pcr farm is soniething of tlie order of 10 tinies the figure i n the papcr. May I add that I believe comparisons of sitiiilar surveys from diffrrent regions would yield significant results.

K . E. Hibut: I would like to start by expressing sincere appreciation of the work Mr. Harrison and

his colleagues have done in this field of study. If we had this information for more areas i t would give us guidance which we have lacked before. l i e has said quite clearly that the geographical area is limited and recognises that tlie results were not necessarily applicable elsewhere. I would like also to congratulate him on the fluency of his verbal csposition tonight. This paper promises to arouse a great deal of discussion and at this stage I will confine myself t o one of the points which occurred to me-that is to raise the question of the relationship of this kind of enquiry to our whole scheme of data collection in the agricultural field. The kind of question tha t runs through one’s mind is this; how far niiglit we look forward to some part of the kind of data gathering which blr. Harrison has undertaken becoming part of the regular routine data collection service not necessarily annually, but perhaps once in five or ten years? Possibly Buckingham might be covered this year, Bedford nest year, and soon, working round the country. Can we pcrhaps look to such developments t o provide us with that extra material which wc will need for agricultural economic analysis in tinie to come. If so, what further information would we like to see collected, either in the estension of an enquiry of this kind by Mr. Harrison, or in otlier enquiries organised in somewhat different ways? As an example of the light such enquiries can throw on problems of political interest we might note that Rlr. Harrison’s picture of part-time farming is of a static situation where stockbrokers or factory employees h;rve farming activities as a steady hobby-sideline. In this area at least, part-time farming as it is often pictured as a step in the farming ladder plays no part and it seems doubtful whetlicr there is any particular justification for assisting sucli units under agricultural legislation.

l~inally, I would like to express appreciation that we have secn the results of this study quickly. Tliey have not, as so often has happened in agricultural ccunoniic cntluiries, stayed around for quite it long wltile until the last 5’ has been dotted and the ‘t’ crossed before publication.

Dr. P. G . J iw ies : 1 should like to raise two points. The first is concerned with tlie dehnition of a part-

time farmer. I suggest that a distinction sliould be made between thc farmer who is forced to take on another job outside farming, because thc size of liis farm busincss is too small to provide him with a re:rsonable income, wid the professional businessman. who purcliases a farm as an investment, and regards the farm as a weckcnd hobby. Uotli arc part-time farmers in the sense that their farming income fornis a part of tlieir total income. But tlie distinction is iniportant, because i t affccts their ability to obtain additional capital ttJ invest in their farms. 1 would think that in a county like Buckingham. there are a greater number of ”professional” part-time farmers than in areas such as Mid-\Vales, the l’cnnincs or parts of Scotland. and consequently. tlie capital position of the Buckingham part-time farmer is, in many cases, superior t o that of part-time farmers in other parts of the country. I t would have been interesting if Mr. Harrison could have divided his sample of part-time farmers into these two categories, and indicated how much of the total capital investment liad been self-financed by the two types of farmers.

‘Tlic second point refers to Mr. Harrison’s assessment of total capital in Table 7. I n particular, I should like to know the basis on which total capital has been defincd. I an1 surprised, for instance, to read that there were 140 farms in Mr. Harrison’s sample whose capital requirements were less than tl,OOO per farm. I presume that this figure includes, a t least in some instances, the value of owner-occupied land. In this context, I would like to ask Mr. Harrison two specific questions. Firstly, does the assessment of total capital

h. ‘15 . increased ’ in the last year from 13 weeks’ trading to 14 weeks’ trading on average and the

Discussion on Alan Harrison's Paper 349

include the total purchase price of fixed assets, such as buildings, machinery, breeding .stock. or only the animal depreciation cost? Secondly, how did Mr. Harrison succeed in assessing the value of owner-occupied land?

B. Dnwsos:

I have a common interest with Mr. Harrison in the subject of structure. This concept is going to be very useful providing we know what we mean by it. Amongst the things Mr. Harrison has not defined is this term "structure" but J do not blame him for that because the meaning attached to it becomes clear on reading the paper. Sow the tradition of empiricism has deep roots in English research and I espect that some of my hearers will feel embarrassed by my use of the term "structure" because of its philosophical connotations, but Mr. Harrison himself has referred to the methodological implications and we shall not get the f u l l flavour of his contribution unless we ponder over these.

I t seems to me that klr. Harrison uses the term in two senses. There is first that of finer suh-division which I believe is the usual meaning. This is all right as far as it goes but I nm reminded of what the late J. B. S. Haldane used to point out, namely, that nature (and in this he would have included human societies) is not so much a collection of things ns a kind of process.

How does the paper appear when viewed in this light? \'cry well, I consider. I was going to say astonishingly well until I heard that Mr. Harrison was a philosopher as well an an economist. In his handling of the multiplicity of factors and their complex inter- relationships, and particularly in his attention to such aspects as the emergence of new factors he has demonstrated a more flintlamental approach to the concept of structure. llorenver he has described all this in the most lucid way. I t will he interesting to see how he tackles the difficult problem of portraying these complex relationships when he mores from the broad ,genern.lisations of his paper to the more detailed account that hehas promised

One further point is required hut it has been made by BIr. Harrison a t t he bottom of page 339 where he says '' . . . description presupposes purpose-ultimately that purpose must be ability to predict both in the aggregate and by sectors". Knowledge of structure should give our methods more predictive power, which is badly needed. I congratulate BIr. Harrison on having made a good start.

A . Evans: I would like to ask two points. Firstly, in a very amateurish effort ten years ago, I

discovered that one third of the profit of a farmer was in his valuation. I would like to Itnow whether Mr. Harrison has considered tha t aspect, because if we should have inflation on any scale again, or alternatively have a rapid increase in eficiency which would lend to a higher ratio of assets to worker this might be an important factor. The second point is this question of borrowing. There is, of course, an income aspect t o this and I would be interested to know whether there is any evidence about farms where there was no borrowing but there ought t o have heen and whether the reason was that there really is not a satisfactory source. You have to repay and the repayment represents a burden on a fairly thin living; for in- stance, the .4griculture hlortgage Corporation is a very specialist body and won't lend in many circumstances.

L. D. Smith: While many of our Wcst country friends woiild like to deny the estent of part-time

farming. I think Mr. Harrison may have shown the estent to which it is iinportant in the whole of t h e South East area. I wonder i f he could give a more detailed breakdown of the amount of income which is derived from non-farm sources, for instance, the percentage of farmers who receive, sny, fl.000 nr fl,500 from non-farm sources?

11'. E. Cave: I woiild like to comment on two points made in this paper. On page 333 it says "the

hroad incidence of t a s legislation would not seem to he particularly favourable, on halance, to private company formation and operation in farming". This of course is true because most farms are small but it is certainly not true of the larger farm. There has been a distinct tas advantage for the larger farmer to form himself into n private limited liability company, hut it is n matter of sizc and there is little advantage iintler ,500 acres and there- after it becomes more advantageous as the sizc goes up.

This is in a way linked with the nest point I want to make. On page 335 at the bottom it aoes on to discuss the capital structure of farms, and it says "the problem the owner- occupiers are now having to facc up to is that the windfall gains of one generation, many of whom bought ns sitting tenants, are reaped as a capital formation problem by the nest' '. This, I think, just touches on a problem which is going to be estremely important in the

us.

350 Discussion on Alan Harrison’s Paper

future for the owner-occupier because of the tremendously inflated values of land. With most farmland making over LZOO per acre, when you get an owner-occupier with 400 acres without debt and if that man should die without having made any provision to overcome difficulties of estate duty then his heirs will have to pay death duties somewhere in the region of L30.000 and this could well liquidate the Company if it has to be paid in cash a fairly short time after his death. This is going to have a profound effect on farm structure in the future and unless something is done about it, it must inevitably mean a further sub-division of the larger holdings which have been growing up recently.

C. J . Lewis: The low figure for merchant’s credit interests me also. As the Survey was camed out

over the period March 1963 to January 1964, is it not possible that the results are influenced by having only a proportion of the sample being interviewed in the high credit demand period. Again, is it not possible that those farmers interviewed in the low credit demand period may have “forgotten” the extent of their indebtedness earlier on in the year. Finally, when discussing merchant’s credit i t is important to distinguish between that part of it which stems from an inability to pay and that part which is derived from an un- willingness to pay promptly.

John Hammond: I would tell a previous speaker, a self-styled “part-time farmer”, that there is no

advantage in a limited company unless profits are made; I do not think he has had much experience in making losses!

I would point out to our excellent speaker that on pages 332 and 333 there appears to be a total ignorance of Section 20 of the Finance Act of 1960; particularly directed at gentlemen farmers and the like.

This Section has been used very drastically in other parts of the country, but apparently not in Buckinghamshire and I am wondering why this is so.

The point of Section 20 is that when a farm has been steadily losing money the Inspector of Taxes can refuse tax relief by way of repayment: elsewhere in the United Kingdom this has had usually one of two results-either the gentleman in question retired from farming with all speed or made a determined effort to reduce his loss to the very minimum, but again this does not appear to have happened in Buckinghamshire.

P. M . Scola: I must join with the others in congratulating Mr. Harrison on the scrupulousness of

his presentation. All the same Buckinghamshire does not represent Great Britain, though t o some extent we are invited to consider that it does. But I should like to comment mainly on M r . Harrison’s approach to the concept of “farm”. It is refreshing to find him seeking to identify the aggregate of each farmer’s activity, but I would query the use of the term “farm” for this concept. In common parlance a farmer is often said to work several farms, but presumably Mr. Harrison would regard this usage as a contradiction in terms. For the whole enterprise I would prefer “farming business” or, if not too cumbersome, “multiple- unit farming business” since this makes the structure clear.

There is a very good case for seeking to discover the number and importance of farming businesses and also of the units of which they are composed-what I would call farms-but I feel that in pruning the Ministry’s lists Mr. Harrison must have spared a larger number of places which carry such small enterprises that they scarcely merit the name “farm”- either in his sense or mine. In Scotland. and I believe also in England, places which offer employment for a t least one person-my minimum to qualify for the term farm-number scarcely one-half of the total number of places enumerated in the census, though accounting for well over 90 per cent of the agricultural activity.

To turn to another point it seems that in Buckinghamshire the part-time farmer is commonly, if not usually, the occupier of a full-time farm. I wonder how true this is of the country as a whole? Certainly in Scotland the great majority of part-time farmers occupy crofts and other part-time units and therefore do not play any very substantial part in the farming economy.

E. Strauss : I found Mr. Harrison’s paper very stimulating both from a broad professional point of

view and for more narrow bread-and-butter reasons. I have always been specially interested in the possible effects of the peculiarly British system of land tenure not only on farm structure, but also on other parts of agriculture, not excluding the marketing system. I think that despite the limited scale of Mr. Harrison’s investigation, a number of very suggestive results have been obtained. My narrow interest in the problem is connected with

Discussion on Alan Harrison’s Paper 35 1 a detailed structural analysis of milk producers in England and Wales which we are under- taking on the basis of a large sample. One of the methods of increasing the value of the results obtained in a special sector is to apply to them more general relationships obtained elsewhere, and in this connection I would very much like Mr. Harrison to tell us, if possible, a little more on a few of the features which he has brought out in his tables. I am particularly interested in the tables dealing with the distribution of capital. Like some other speakers, I should like to know more about the concepts employed by Mr. Harrison. Is the “total capital” used identical with the gross assets of the farms at the peak period or have the liabilities been deducted to provide net assets, and so on? I should also like to know whether it has proved possible to make an estimate of the total capital employed by farm businesses in the country and of the capital per acre employed in farms of different size. Finally, I notice that basically Mr. Harrison favours two-way tables showing a number of variables related to size in terms of farm acreage. I wonder whether this method has been in any way extended to obtain further classifications, to attempt the calculation of standard outputs and to relate capital to standard outputs? On the purely formal side, one of the problems with which we are frequently confronted in assessing results is that of the statistical sig- nificance of partial cells and of data raised from such cells, and I should be very grateful if Mr. Harrison could tell us how he has dealt with this problem which must have arisen in the type of analysis he has carried out.

J . D . Sykes: I wonder if I could ask Mr. Harrison whether he could give us some views on what is

likely to happen in Buckinghamshire. I t is interesting to see the point he made about the risk which individual farmers carry and relate that to the observation in the second part of the paper on page 333 where he talks about the lack of evidence of farming companies. I t would be interesting to hear what Mr. Harrison has to say about the possibility of farming partnerships developing, or again, of farming companies emerging.

D . J . Alexander: Part-time farming in Bucks. should not give the impression, e.g., to people in Whitehall,

that the majority of farms of under 100 acres are part-time. For example, in the largest County in Northern Ireland, only 2 per cent of full-time farmers have over 100 acres.

The surprising thing about the agricultural structure of Bucks. is that, despite its prime location, i t still presents complicated problems. There are, for example, problems of continuity for individual farm businesses and the resource allocation problems surrounding the inheritance mechanism.

The allocation of the land resource is of interest to me. Mr. Harrison mentioned grazing tenancies which introduce some flexibility into the structure. How far might persons (not farmers) who acquire agricultural property, provided they do not themselves farm it. but annually let i t out to career farmers, contribute to a land reserve and introduce a flexible adjustment system for area size of farm businesses?

A . Havvison : First, let me thank you for the trouble you have taken in raising questions and making

comments. I came here knowing full well I would go back to tackle perhaps another year’s analysis. I think I was very optimistic in thinking I could get i t done in a year. Let me go quickly over some of these questions, simply taking them in order.

Of course, Bucks. is not likely to tell us all we want to know about England and Wales or any other aggregate, but it stretched our resources to the absolute limit. Moreover, we have the example of earlier work in that county with which to make comparisons and obtain some indications of how changes are taking place. It is an interesting county, roughly 60 miles from the south, which feels most the pull of the eight million or so people who live in Greater London, up to the little relatively isolated villages right up in the north. We expect marked structural differences to stem from the very different so11 patterns and topographical conditions. We have barely begun to see what we have found out about the differences between the Chiltern based commuting area of the south and the middle and the north. That all must lie ahead.

I have been challenged by Mr. Hicks and others on this question of my small figure of merchant credit, and I knew this was going to come.

To the extent that it is a matter of genuine differences, and not of definitions, I wonder if my sample is wrong, or their sample is wrong. Just because you get figures from the Corn and Agricultural Merchants Association, i t is not a guarantee they are going to be quite right. I am reminded of a study we did a year or two ago in this field. It seemed.that, to go round and find out from farmers how much they owed to their merchants. rmght be not only a very time consuming and a very inefficient way of employing our very limited re- sources but one likely to provide us with wrong answers into the bargain. We decided,

352 I3iscirssio.n. on Alan Harrison’s P a f w

therefore, t o visit a number of merchants in the area. They were selling something like 4124 million worth of goods in a year, so it was a reasonable sample in terms of overall size. \Ye asked them how the amounts their farmer customers owed them varied seasonally in relation to total sales. We had imagined they would know this. But they did not know it. They welcomed the study therefore and they started to keep some records over the next year to tind out. Of course, they may have much more detailed knowledge by now.

I am reminded of Mr. Morgan’s study with co-operatives. He found out that the average sum outstanding by farmers to their co-operative trading societies represented almut eight weeks’ sales. This is well below the 14 weeks quoted. On the other hautl I cannot claim that my figure is absolutely right. I referred a t one point t o specific grounds for treating farmers’ answers with reservation. An average or global figure will in any case conceal big differences between farms-between large and small ones for example. One figure we found a few years ago was that something like SO per cent of the sums, that merchants were owed by their farmer customers, were owed by 10 per cent of those cus- tomers. These were largely pig and poultry producers. And of them the smaller ones were those the merchant needed to watch carefully. There have been some changes over recent years which I would have thought would tend to increase merchant credit-for esample, increasing hire-purchase and reduced profit margins-but there have also been changes within the feeding stuffs industry which would tend to reduce it. I would think that a lot of the old family firms which drifted into granting more credit than was good for them have been taken over by more business-like concerns. I t is still an open question. I think.

There are regional differences in use of mercliant and other credit. II’hen I lived in the north I knew pretty well who was sitting on, or had the private mortgages on, the farms in my village. It was just something I knew having lived there about 20 years. That was all right, no-one making a survey can find that out. I don’t know how many years you would have to live there to be accepted enough to have anyone breathe that sort of information to you.

Let me thank Mr. Hunt for what he said about this study. Certainly there i s great need for more regional work and I hope the time is not long delayed before studies ot :srm business can be carried out in a regular and systematic way. A beginning can be made ! am sure. Just before the field work for this study was carried out, I wm able to discuss i t with him and others at Oxford. Perhaps that is why i t does not seem long ago. It seems a long time to me, however, and, so long as field work has to be done in the way we did ours. then progress will be slow. That is more a criticism of the state of the subject and the relevance of national statistics than of our facilities, however. So far as this particular paper is concerned we found it very difficult to get in the final information and had to hurry on with the analysis of some sectors and see what came of i t instead of putting all the data on to punch cards right a t the beginning. We will have to begin analysis again. as i t were.

Dr. James from Bangor pointed out t ha t part-time farmers could be classified iuto two types, those who are forced into it. those who are hobby farmers. I do draw attention to the fact that two types of part-time farmers are present and describe them in terms akin to those used by Dr. James. These groups are the manual and the professional if you like. This question of forcing people into part-time activities is one on which me can really say very little at this stage.

He also asked me to what extent they can plough back capital. Well, again we cannot say much about this, but when we find that some of the largest merchant bankers in the country are part-time farmers in this area, some of them having overdrafts with their own hank-a really splendid way to arrange things-then we realise there is some scope.

We would have to spend a bit of time on the question of definition of capital I think. Let me put i t this way. Each farmer will a t one point in the year have a maximum amount of capital on the place. One can go and try and get the peak numbers of stock which are on the farms and t ry to estimate the estent to which these peak numbers coincide. If fair market prices are then applied this will give us a measure of tenant’s capital. Landlord’s capital covers all fised resources. The figures used are averages based on o combination of data from Mr. Peters at Oxford and the information available from our own study. These averages reflect the effect of size of farm on price and the presence or absence of buildings 2nd other fised equipment.

Mr. Dawson of I-reds raised some general philosophical questions about what one is doing in this sort of study. Briefly, I do not see why economics shoold have any different aim ultimately from any of the other sciences. I can see why one may not do particularly well at it, but the aim. it seems to me, should be to look for some sort of uniformities in the material and to look for them in a way which permits the formulation of hypotheses, or predictions, which are in principle falsifiable. Well. we, as applied economists, are just a t the stage of looking for some sort of uniformities in the material. For a long time botany was reRarded as a backward science-we are rather like botanists of soiiie years ago. They listed evervthing. they listed, and listed and listed, hut eventiinlly they found the road to

Disciission on A lan Harrison’s Paper 353

listing in ways which permitted them to make forecasts of what would happen when they did cross pollinations and all the other sorts of things that botanists do now. One outcome of this approach is that we did not set out to limit precisely the field of study at the outset. I think this bears on other questions which were asked. We were quite happy that we were doing something useful. That is perhaps not a bad way to set about any piece of work.

Mr. Ancrum Evans pointed out that a third of profit is commonlyin the form of the valuation, with the result that the more liquid or cash resources are reduced, and, that this may be dangerous. I think this is a point that has been made elsewhere by others, that, farmers think of themselves, not as saving and then investing, but as investing all along as it were. Perhaps they select the best gilt from a litter, or they retain certain items of stock. Having done that they are then committed to keeping those animals going, keeping them alive, buying feeding stuffs for them, and so on. I think, in fact, many probably do build up their capital in this way. Once they have embarked on this sort of investment, n number of them will find they have to invest more than they bargained for. That is why I do not think there is the same danger of investment reduction in the conflict between firm and household that other people have seen. I t may well be consumption, or household, needs which are artificially restricted.

Mr. Evans also asked about income and ability to repay loans, particularly long-term ones. This was a sector where we had to trim our aims in relation to the information which farmers were prepared to give us. I think a number of advisory workers must have had to deal with cases where land prices had reached the level a t which it was very difficult for n farmer to repay the capital and the interest payments from the sort of profits that he could earn from this land. This is frequently the case. We have had cases in our department where we have come to the conclusion that the investment is impossible. The interesting thing is that the farmer and a bank manager somewhere have been prepared to tackle this situation. I t is this sort of thing that I have in mind in pointing out that some sectors of hanking may have over extended.

This raises some important political issues about the role of credit institutions generally nnd the farmer’s position in a land hungry economy.

Mr. Smith of Oxford referred to the wider area of South-East England for which my figures of part-time farming may be a good guide and asked me whether we could shed more light on income from non-farm sources. The short answer is that, we cannot say a great deal more about actual income levels. At the same time, may I say that T accept the point made by a number of people that part-time farming in the South is liltely to differ irom part-time farming in some other regions.

Mr. Cave pointed out that my comments on company formation and the tax situation needed amplification. I would agree with him and I am grateful for the points that he made and for Mr. Hammond’s point, in reply to Mr. Cave, that this is largely a question of size. With regard to the effect of estate duties on land ownership I think he quoted an example which is perhaps a little misleading-he thought of some businesses having to find L30,OOO duty. Judging by the total of three or four million pounds which has to be found annually lor estate duty on land, a relatively small number of such cases would soon cover this. Of course it is not just land which attracts estate duty, they would be paying on other resources as well, but we must not forget the 45 per cent alleviation of estate duty on agricultural land. Nevertheless, I accept Mr. Cave’s point that the effects of reduced renting on capital structure will be profound. Moreover, the levying of estate duty will tend to prodnce more widespread ownership.

To Mr. Lewis, the merchant credit figure is an estimate of the year’s peak. I agree with the other points he raised about biased answers being likely to arise because of the time of visit. We were aware of this danger and tried to combat it. I t remains to be seen, however, whether, we have been successful.

To Mr. Hammond, I d not think we said anything to suggest quite fairly and squarely that there was a lot of taxloss farming, as i t is often termed. There may be, but we were not studying i t a t this stage-we were just studying what resources they were applyinfi, not how efficiently they were applying them. My impression is not one, however, of sn- called tax-loss fnrmers in full retreat before tax inspectors armed with Section 20 of the 1960 Finance Act.

Mr. Scola said that Buckinghamshire does not represent Great Britain but I think I have already said that I did not regard Bucks. as giving all the information we might like. He did rather want to define my terms and I can quite appreciate that they may not he itleal for his purposes. Having defined them, however, I feel very much inclined to let them stay. Someone else pointed out that we had some very small farms here. We were not concerned, however, to place any upper or lower size limit on farm businesses. If the holding were concerned with farming activities-farming stnck-farming crops-then it came within our study. We did need then, however, to establish which were separate units and to do

3 54 Discussion on Alan Harrison’s Paper

this chose a capital-use criterion. Whether they were very small or not really did not arise, except that we chopped out the less than five acre holdings.

I was asked how many part-time occupations were closely linked with the farm. I think the short answer to that is very few-some millers, dealers, some agricultural workers and so on-but the records need fuller examination.

In reply to Mr. Strauss, this seems a clear case where we ought to compare notes. A short answer is that we have not yet been able to make the statistical tests he spoke of. This will clearly have to be done, particularly when we try to establish relationships between some of the smaller groups. We looked with a bit of suspicion a t some of the cells where we had small numbers of course. This is a feeling I have simply from doing the field work, apart from any inclination I would have on theoretical grounds. The figure of capital investment would, I think, accord with his use of the term gross assets a t the peak period. Certainly it is not net of liabilities. As to whether the material will lend itself to incorpora- tion in aggregate or global studies that is one I cannot deal with now. In a very real sense, however, we saw this not as a study to produce a few aggregate figures but one designed to isolate sectors of change within a given area-albeit a largely political one. I would add that I am convinced that one of the most useful ways one might classify farms is according to the time period for which they are prepared to plan ahead-particularly where this can be linked to available capital.

In reply to Mr. Sykes, I think that the structural changes already made in farming- and more particularly the reduced importance of farm renting-must result in further important changes over the next decades. More company formation and more partnerships are likely. On the other hand those two developments do not exhaust the many ways in which the relative burdens of risk bearing, management supply and capital provision can be altered. Other countries-especially perhaps the U.S.A. and Western Europe-may well have institutions embodying ideas capable of fruition in our changing environment.

Mr. Alexander referred to the extent of part-time farming in Ireland. His comments emphasised the point that one can look a t statistics of farm structure and yet have very little idea of what changes are taking place in that structure. One could have everyone swapping farms without it becoming apparent from what would currently be regarded as a fair statement. of agricultural structure. And this I had in mind in my opening remarks, when I said we would want to study in more detail not simply structure, but changes in structure. I think the study of changes in structure is going to lie rather in the future.

That is a very inadequate treatment, I am afraid, of all the points you have raised but perhaps goes some way to meeting some of them.