Britain’s farmers are urging the government not to hit them with inheritance tax on their agricultural land.

The National Farmers’ Union (NFU) has written a letter to Prime Minister Sir Keir Starmer calling on him to deliver a renewed agriculture budget and confirm the continuation of Agricultural Property Relief (APR).

They remind Keir Starmer that he told them in 2023 that rural communities were in his DNA, as he grew up in a rural community.

The NFU are concerned by reports that Rachel Reeves could target Agriculture Property Relief (APR), which allows land or pasture that is used to grow crops or to rear animals to be free of inheritance tax, in the budget.

NFU President Tom Bradshaw says that reports that the government is considering cutting the agriculture budget, and possibly reviewing APR are incredibly concerning.

“We are asking for a renewed multi-year annual agriculture budget of £5.6bn, not because it would be nice to have, but because it is an essential investment to deliver the government’s environmental goals, increase growth and support the economic stability of farm businesses.

The loss of APR could mean family farms, who are vital to producing food for the country, providing jobs and looking after our countryside, having to be sold to cover the costs. Changes would amount to a “Family Farm Tax”. It would also have a devastating impact on tenant farmers and new entrants.

There is a small glimmer of good news amid the gloom in this morning’s public finances for the chancellor.

The ONS has cut its estimate of public sector net borrowing in the first five months of the financial year by £1.1 billion to £63.0bn.

That, though, didn’t prevent borrowing running at £6.7bn above the forecast from the fiscal watchdog (the Office for Budget Responsibility).

Philip Shaw of Investec told clients:

Although the latest set of data represents a relative positive surprise, it does not shift the dial on the wider fiscal picture. At the halfway point in the financial year, borrowing is tracking some £1.1bn per month above the OBR’s projections in March and although the deficit is on course to undershoot last year’s £121.9bn, its forecast of £87.2bn for this year looks unachievable.

Moreover it will certainly not alter the stance of the forthcoming Budget on Wednesday next week when Chancellor Rachel Reeves is set to unveil higher taxes. Our Budget and Spending Review preview will be published later this week.

Inheritance Tax has brought £4.3bn into the government’s coffers since April, which is £400m more than in the same period in the previous financial year, new data from HMRC shows.

Rachel Reeves may attempt to raise more from IHT, which raised almost £7.5bn in the last financial year, in the budget.

Nicholas Hyett, investment manager at Wealth Club, says:

“Inheritance tax is an absolute cash cow for His Majesty’s Revenue and Customs, which is why it remains in the spotlight ahead of next weeks’ Autumn Budget. No one knows what changes will be announced, but most agree there will be some attempt to milk more revenue from estates.

The great thing about inheritance tax from the government’s point of view is that it’s complicated, with a whole host of rules that could be tweaked to boost the tax take. Tweaks could include changes to Business Relief, including on AIM shares, making pensions subject to inheritance tax and extending the time period needed to make gifts inheritance tax free.

A group of MPs are urging Rachel Reeves to impose a wealth tax on Britain’s rich in next week’s budget rather than announce spending cuts that would hit the most poor hardest.

In a letter to the chancellor, the MPs – including the former Labour leader Jeremy Corbyn and his then shadow chancellor, John McDonnell – say she could raise £24bn a year from a 2% tax on wealth above £10m and lay the foundations for a fairer, more sustainable economy.

The letter, organised by the campaign group Green New Deal Rising, says in contrast to the general trend, taxes on the very richest are only slightly more onerous than they were in the mid-1960s.

“This is deeply unfair and immoral: in an age of climate and economic crises, where public funds are desperately needed, it is necessary that we redress this imbalance. The transformative potential of taxes on extreme wealth is clear, and appetite for them is growing.”

Cara Pacitti, senior economist at the Resolution Foundation, says:

“Six months into the financial year, Britain is borrowing £6.7bn more than expected at the time of the Budget in March. This reflects central government spending which is £11.5bn higher than anticipated, largely due to public sector pay rises and higher running costs.

“Today’s data highlights the scale of the public finances challenges facing the Chancellor as she grapples with overspending today, the need to avoid austerity in the future, and having to fund extra public service spending through tax rises.”

The Resolution Foundation explain that this morning’s data shows that central government spending is already £11.5bn above the OBR’s March forecast

Most of that comes from spending on good and services, typical higher pay and running costs, which they say “tallies with the £22 billion ‘black hole’ identified by the Treasury back in July.”

UK borrowing would have been even higher last month, without Rachel Reeves’s unpopular decision to means-test pensioners’ winter fuel payments, and the end of the extra Pensioner Cost of Living Payment given in 2022 and 2023.

Net social benefits paid by central government decreased by £2.0bn in September to £25.7bn.

The ONS says:

The usual increase caused by the annual uprating of inflation-linked benefits was more than offset by reduced spending on Winter Fuel Payments, partly because of the absence of one-off cost-of-living payments, which were included in September 2023 and partly because of the change in eligibility.

Winter Fuel Payments are recorded (on an accruals basis) each September when the eligibility of claimants is determined, although the cash will not be paid until November.

Darren Jones, chief secretary to the Treasury, says the government was right to agree public sector pay deals last summer, even though they pushed up government spending (see earlier post):

“We have inherited a £22 billion black hole in the country’s public finances, including no plan to fund pay deals for millions of public sector workers. Strikes cost at least £3 billion last year, so it was the right thing to do to end those damaging disputes.

Resolving this blackhole at the Budget next week will require difficult decisions to fix the foundations of our economy and begin delivering on the promise of change.”

As a share of the economy, the UK’s national debt is the highest since the early 1960s.

The Office for National Statistics reports that public sector net debt excluding public sector banks was provisionally estimated at 98.5% of gross domestic product (GDP) at the end of last month.

That’s an increase of 4.0 percentage points more than at the end of September 2023.

However, it’s a little lower than in August, when the debt/GDP ratio was 98.8%. And that has beren revised down from an initial estimate of 100%.

Jeremy Hunt’s cuts to national insurance hit the government’s tax take last month, today’s public finances report shows.

The ONS says that compulsory social contributions decreased by £0.9bn to £13.9bn in September, “largely because of the reductions in the main rates of National Insurance in early 2024”.

So far this financial year (since April), compulsory social contributions are down by £5.2bn to £82.1bn.

Hunt cut 2p off national insurance from January, and followed this up with a second 2p cut in April, which brought the main rate of national insurance contributions (Nics) paid by workers down to 8%.

In April, The Treasury says that the average worker on £35,400 will save more than £900 a year as a result of the cuts in January and April.

Having promised not to raise taxes on ‘working people’, Reeves can’t really reverse Hunt’s cuts to. But, she has strongly hinted that she could raise employer national insurance contributions.

Public sector pay rises also added to government spending – and thus borrowing – last month.

Today’s public finances report says:

Central government departmental spending on goods and services increased by £2.6bn to £35.9bn, as pay rises and inflation increased running costs

Shortly after taking office, the Labour government settled pay claims with junior doctors, and with train drivers, to end industrial action that had been hurting the economy.

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

Britain’s government borrowing rose faster than official forecasts expected in September, in a timely reminder of the challenges facing Rachel Reeves as she prepares to deliver the budget next week.

The UK borrowed £16.6bn last month to cover the difference between public sector spending and income. That’s £2.1bn more than in September 2023 and the third highest September borrowing since monthly records began in January 1993.

Significantly, it’s also £1.5bn higher than the £15.1bn borrowing forecast by the Office for Budget Responsibility (OBR) for September, a sign that higher borrowing is adding to the chancellor’s challenge of raising money for public services without breaking pledges not to raise certain taxes.

However, it’s a little lower than the £17.5bn which City economists had forecast.

So far this financial year, the UK has borrowed £79.6bn, which is £1.2bn more than at the same point in the last financial year

That is £6.7bn more than the £73bn forecast by the Office for Budget Responsibility for this period. We’ll get the OBR’s new forecasts in just over a week’s time, after Reeves delivers the budget.

The latest public finances show that central government’s receipts were £80.7bn in September, £3.3bn more than in September 2023.

But that was overtaken by higher spending; central government’s total expenditure was £93.7bn in September, £5.5bn more than in September 2023.

Reeves is heading to Washington DC later this week for the annual meetings of the International Monetary Fund and World Bank, where finance ministers, central bank governors, thinktank chiefs and charity bosses will discuss the state of the global economy and its ability to generate a higher standard of living.

We’ll hear from the IMF, and from Bank of England governor Andrew Bailey, later today.

The agenda

• 7am BST: UK public finances for September

• 7am BST: European Union car sales for September

• 2pm BST: IMF to publish World Economic Outlook

• 2.25pm BST: Bank of England governor Andrew Bailey gives a keynote address at the Bloomberg Global Regulatory Forum

• 3.15pm BST: IMF to publish Global Financial Stability Report