I want to start on a positive. The new budget has some good stuff. The cut to draft duty on beers in pubs, the implication of 10-year financial forecasts to end short-termism, boast to defence spending and support for Ukraine against a fascist invasion, and more small businesses are now exempt from NI will help rejuvenate the economy. Likewise, many of the proposals in Rayner’s worker’s rights bill are positive.
However, I do have some concerns regarding the budget and its potential impact on farming communities.
I understand that large corporations and wealthy individuals purchase farmland to avoid taxes, which is an issue that needs addressing. However, Reeve’s comment about setting a £1 million limit to protect small farmers may be effective in areas with lower agricultural land prices. Unfortunately, farmland in Cornwall, especially in the Truro-Falmouth area, is very expensive. Implementing this price limit based on a “federal” standard will significantly harm rural communities where land prices are higher.
I believe a fairer solution would be to redefine what constitutes a “small farm.” Instead of basing this definition on land value, which is influenced by geography and external market forces beyond the control of individual agribusinesses, it should focus on the amount of money the farm/business makes. For example, a farm that earned an average of £1.5 million in profits (some of the larger corporate-owned ones do) over the previous 5 years could pay 20% above £1million. At least then you’ll be protecting genuine small businesses.
Unfortunately, much of the land in Cornwall—and across the country—is being purchased primarily as an investment by billionaires and large corporations. Given Cornwall’s outstanding natural beauty and ever-increasing land price, it is not surprising that these people are buying land in the Duchy, which in turn drives up prices for local farmers. This situation places additional strain on Cornish farmers, who are already struggling, and may ultimately force their children to sell the family farms. As a result, the corporations and wealthy investors that the budget was meant to target can swoop in and buy even more land from these families at a lower cost. In other words, Reeve’s is unintentionally benefiting large corporations.
When editing this article a horrible thought came to mind. Farming already has the highest suicide rate of any industry in the UK. If farmers feel that the only way they can pass their family farm to their children is to die before the rules come in place then many would take their own lives to ensure this. It’s a depressing thought but one that should be considered.
The budget is not set in stone. I hope that as revisions and upcoming debates take place, a fairer solution can be found to prevent family farms from falling into the hands of corporate investors. Many MPs do care about their constituents, or at least the votes they get from them, so if you have a Labour MP please do contact them if you have any concerns.
* Jack Wilkin is a PhD student at the University of Exeter researching past environmental change around the island of South Georgia. He is a registered supporter of the Lib Dems.
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14 Comments
I understand why people don’t like inheritance tax, and that is true whether someone owns a farm worth £5M and wants to pass it on to a son or daughter, or someone owns a small company worth £5M and wants to pass it on. In both cases, inheritance tax can be avoided by transferring the asset more than 7 years before death or by putting the asset in a trust that never ‘dies’.
Hear, hear. Unfortunately, Labour have always been an urban party that doesn’t get, understand, or value farming. And as long as supermarkets can somehow find alternatives when harvests are washed out/destroyed by drought, the realities of climate change and the importance of food security may not seem the priority they should be.
Hopefully they will listen to our rural MPs and the NFU and so on, on this topic.
@ Cassie. “Labour doesn’t get, understand or value farming”.
I’m sorry to disagree with you, Cassie, but my Granddad (who had a small hill farm in County Durham) always said the opposite.
The late Tom Williams was a first rate Minister of Agriculture in the Attlee government and piloted through the 1947 Agriculture Act in partnership with farmers and the agriculture industry. It gave a stable and assured market to British farmers after all the difficulties of the 1930s and the War.
Later, both Denis Healey and Jim Callaghan had an excellent and sympathetic approach to farmers, indeed sunny Jim actually had a dairy farm himself after he retired as PM.
I’m not an expert on agricultural land value, but I assume the value of land in the Falmouth/Truro area, or indeed anywhere, must be driven by one of two things.
Either it can be farmed at a profit, in which case the generous phased payment plan over 10 years for the inheritance tax (at a healthy 50% discount to standard) should be affordable for whoever inherits.
Or, the price of the farmland is driven up because it is used as a store of value to deliberately avoid inheritance tax. In which case Reeves has just fixed that, and values will fall. That would be a good thing if your primary concern was keeping the farm within the family (as opposed to cashing in by selling it).
Even after the changes introduced in the budget, farmers are getting a remarkably good deal compared to just about everyone else.
Jack Wilkin,
You didn’t say what the price of agricultural land is in Cornwall. If we assume it is £8,500 per acre (see https://www.savills.co.uk/landing-pages/rural-land-values.aspx ) a 200-acre farm is worth £1.7 million. If it was already owned by a couple then the value of the estate being inherited by a child from each parent would be under the £1 million. It has also been pointed out that a child could inherit half of a farm valued at £1,325,000 without paying any inheritance tax. The number of farms effected according to Dan Neidle on X is about 200 according to the Thursday night’s paper review on Sky News.
I would hope that farmers would not be considering suicide following this announcement but instead will be considering giving a share of their farm to one of their children.
‘The number of farms affected according to Dan Neidle on X is about 200…’
So why is the NFU ‘mobilizing our members for a mass lobby in the coming weeks’? ‘Mass lobby’ suggests more than 200.
NFU President Tom Bradshaw: “The Treasury’s figures which claim this will only affect one in four British farms are misleading.”
It seems the Treasury included ‘smallholdings and houses with a few acres let for grazing’ in the total.
‘farmers are getting a remarkably good deal compared to just about everyone else.’
How so? What ‘good deal’ does the budget contain, exactly? How does it alleviate the everyday costs of producing food, against high energy bills, rising wage costs, rising costs of feed/fertiliser/plant and against tight margins offered by supermarkets and other buyers?
@David. ‘my Granddad (who had a small hill farm in County Durham) always said the opposite’
Fair play. My grandfather (50 acres in Cumbria) voted Labour, too. I suppose I’ve grown up seeing very different attitudes to the 1970s and before. Perhaps the difference is that Callaghan and his predecessors lived through WWII, rationing, food shortages etc?
@Cassie – it’s a good deal because they pay inheritance tax at half the rate that applies to most other assets, with a much higher allowance before it kicks in, and they get 10 years pay it. That is a much better deal than applies to estates that hold other types of asset (e.g. residential property or cash).
But if you want alleviate everyday costs, inheritance tax is the wrong place to start anyway.
We have just had a General Election. The Labour Party could have campaigned on an increase in employers’ National Insurance or the removal of Agricultural Property Relief from Inheritance Tax. They chose not to but hid behind the phrase of “not increasing taxes on working people”. Already this Labour Government has the scent of being here for one full Parliamentary term as in the 40s, 60s and 70s rather than Blair’s 3 terms of New Labour.
Cassie,
(One of my grandfathers farmed in Cumbria, Kent and Buckinghamshire.)
Have you looked at Dan Neidle’s comments on X? Here is one, https://x.com/DanNeidle/status/1852064433738256394?ref_src=twsrc%5Egoogle%7Ctwcamp%5Eserp%7Ctwgr%5Etweet where he writes, ‘Less than 500 farms/year will be pay more tax as a result of this change every year. Possibly as few as 100’.
Or another one https://x.com/DanNeidle/status/1852010911147442665?ref_src=twsrc%5Egoogle%7Ctwcamp%5Eserp%7Ctwgr%5Etweet he writes, ‘Or fewer than 200 if two spouses both use the £1m cap. Fewer than 100 (6%) {per year} if they also use their nil rate bands’. This last one includes a table showing that only 117 farms valued over £2.5 million receive agricultural relief.
In 2021 there were 216,000 ‘farm holding’: 54% owner occupied and 31% mixed (owning some and renting some).
@Michael BG
The problem we have is too many farms are owned by people who in normal life would be retired, I see articles favouring the citing 88 and 90 year olds, who for reasons unknown are not passing the family farm on to the family members who are currently working the farm…
I think the mistake Reeves is making is not providing a tax efficient way for farms to be passed on and thus providing openings for budding young farmers to get into the business.
We need to make it profitable for farmers to farm and not simply sell out to home builders or solar panel operators (who are profiteering from the feed in tariffs and aren’t really contributing to low energy prices and net zero.
Roland,
The problem with farmers retiring could be because they have not made enough National Insurance contributions to receive the full state pension and haven’t made provision for a private pension snd so still need an income from their farm.
@ Michael BG, @ Roland
Nearly all elderly farmers will have a full pension. If they don’t they can apply for pension credits and could actually be better off than if they did have one. They’d get the WFA for example.
Retirement isn’t compulsory. If the farm is set up as a limited company it will be more tax efficient to keep the farm owner on the books as a nominal employee, or director, well past normal retirement age. It probably won’t mean that they would have to be up at the crack of dawn to milk the cows but I accept that some will still be doing that.
@Peter Martin -” If the farm is set up as a limited company”
From talking to farmers around me, it would seem it is more common for farms to be sole proprietorships, hence the issues around succession and transfer. I suspect part of the problem is actually getting around to making a decision, which if there is more than one child could be problematic, or if the children have no interest in taking on the farm. Hence why I suggest we need to make it easier and tax efficient for the farm to be transferred (sold) within the farming community, rather than being sold for potential housing land value.
The banging on about housing just increases the premium speculators/investors are prepared to pay; yes the land may be designated as not for housing, but if the land owner wants housing and the council are having problems finding land… that premium can represent a x2 or x3 on agricultural valuations…