Rachel Reeves needs to rid herself of troublesome farmers. It’s become obvious, if it wasn’t at the time of the budget, that they are not going to go away.
Their shouts of protest are getting louder and the petition against proposals to tax inherited farms is growing longer.
Tractors in Parliament Square is never a good look, especially when it makes a Labour government look like it doesn’t understand the concerns of rural communities – which, if ministers are honest, they don’t.
Worse for the chancellor, farmers have a strong argument for a fundamental rethink of the new tax regime, which is why they will be in Westminster again this weekend, megaphones in hand, and are gathering more allies every day.
Last week, Tesco joined Asda, the Co-op, Lidl and Morrisons in decrying the tax charge. Echoing the National Farmers Union (NFU), Tesco said that “the UK’s future food security is at stake” and that the government should pause the introduction of inheritance tax on farms worth more than £1m.
As the number of the NFU’s supporters multiplied, the Office for Budget Responsibility (OBR) issued its analysis of the tax changes, due to take effect in April.
In its role as the government’s independent forecaster, the OBR makes judgments about how much taxes will raise to judge how much the exchequer will need to borrow each year to meet spending plans.
It said the Treasury’s figures were at best uncertain and at worst could have a large hole where millions of pounds of tax receipts should be.
In the next decade, most older farmers are unlikely to find a way to avoid the tax, meaning many of those who inherit will be forced to sell farms that in some cases have been in the same family for generations.
After what the OBR calls the medium term, it’s possible that the Treasury will earn very little, having turned farmers into mini-aristocrats. As any duke or earl knows, tax planning happens from the moment one is born. They live on the proceeds of tax-free trusts, shielded from HMRC. Farmers may have to do much the same.
Tax expert Dan Neidle says the NFU is exaggerating when it claims 75% of farms will be caught by the measure, but agrees “the proposal is failing to collect as much revenue as it should from the people it is actually aimed at.”
If we rewind to last October, the farm tax was one of the most eyecatching measures Reeves put forward in her first budget. Reeves said she wanted to end a situation where anyone who inherits a farm from their parents does so tax-free. (They also inherit the equipment via business property relief tax-free.)
Like one of her first attempts to raise cash – scrapping the winter fuel allowance for all but the poorest pensioners – the move was billed as a way to end a universal subsidy enjoyed by the rich. Only the biggest farms claimed the tax relief, the reasoning went, and that would always be the case, justifying the introduction of a 20% tax (half the standard rate) above a £1m threshold for a single farmer.
Hang on, said the NFU, there are many more ordinary farmers who are asset-rich and would be caught by the new rules, and asset-rich doesn’t mean high-income – a point that the organisation has made consistently and which chimes with the reality of farming across much of England and Wales.
Many farmers scratch a living on a patch of countryside that has become very valuable, often after adjacent land has been bought and sold by very wealthy individuals wanting to transfer their money into an asset that has no inheritance tax. Do they want to farm? No, they just want to avoid their wealth falling into the hands of the tax authority.
This is a theme in the ITV drama Out There, starring Martin Clunes as a Welsh farmer who has remortgaged three times in 10 years to stay afloat. His plan is to keep the business going for his son to inherit, but his income is so small that the pressure to sell up to a developer is constant.
If Labour’s plan was to reorganise farming to eliminate the thousands of farms scratching a living, the tax is a brutal and indiscriminate way of going about it. If it was to tax those who are genuinely wealthy, it misses the mark.
Someone like Guy Singh-Watson should be a supporter of the tax change, but he very quickly spotted that the tax threshold – even if it is raised to £3m by farmers combining their allowance with a partner and using other reliefs – remains low when land prices are high. The former owner of the Riverford organic food business says that a rethink is needed. So does Neidle.
There are rich landowners who should pay more tax, but as the chancellor prepares to release technical analysis of the reform, she should acknowledge that this was a bad plan and take the opportunity to announce a wholesale review instead.
To plough on will be to have farmers on her doorstep for the rest of the parliament. They know they have a strong case – and, unlike the winter fuel allowance claimants, are not going to give up.
