Meet Llewellyn (not his real name). Llewellyn was a farmer I met in my old job and the National Farm Research Unit. The job I used to pay bills when I was representing Woodbridge as an (unpaid) town councillor. I called farmers with surveys and hoped that they would be nice to me (sometimes they were…).
Llewellyn’s wife picked up. She, like him, was in her 80s, though she could barely speak a word of English. See the people in rural Gwynedd have performed the same job as their ancestors have in the same place since the late stone age. In fact, the farmers of Gwynedd are the people closest related to those that built stone henge – a fact proven by genetic analysis of skeletons. Not sharing my Anglo-Saxon heritage, Llewellyn’s wife was Welsh monolingual.
Thankfully for my job, Llewellyn was not.
He told me that he hadn’t been on a holiday for 25 years. The reason being was that Llewellyn annual income was £13,000 a year. Llewellyn’s land (the mountain the other side of Snowdon) was very expensive. Apparently, it could be sold for holiday homes for an enormous profit. The NFU has said that this makes 80-something Lewellyn fair game for Labour’s changes to inheritance tax. The government disputes this suggestion. Insisting that their own research was in all ways superior to the professionals and peer-reviewed organisations that state the contrary.
The situation is muddied by the Institute for Fiscal studies admitting two factors which spells potential doom for our agri-sector:
- ‘Nevertheless, in some cases [farmland] will simply yield too little income (and the inheritor will have too few other resources) to pay the tax. The owners might choose, or be forced, to sell part or all of the farm.’
- ‘The exact number that will be affected is uncertain but government figures imply it will be significantly less than 500 estates per year…’
Labour insists that marking their own homework is a worth-while enterprise. I (and most farmers) disagree.
In a post-Brexit, post-truth world it is clear that facts and expert opinion no longer carry the weight in public discourse that they once did. In much the same way that the last government crusaded against doctors and health-care workers, this government has chosen farmers.
No less defensible (and arguably crueller) the “Bus Tax” will remove mobility and agency for thousands of rural working people.
It seems that many commenters on social media were to be believed believe that farming is enormously profitable. Most farmers hold a title, a castle and probably a butler. We’re all multi-millionaires, don’t you know?
Some of us have been quietly frustrated by the ‘constructive opposition’ approach from the Lib Dems towards the (new) New Labour Government. Imagine my delight when at long last the banner was raised and troops mustered to make a public stand against a government policy. At last, a chance for the Lib Dems to make a big show of protecting our rural voters. Or so I thought.
Another contributor to this blog claimed that they were siding with some ‘very vested interests’. This is a highly disappointing statement. Most farmers are not rich. Most farmers work for a business, they do not own the business. Many, like Llewellyn are very poor. Pointing at the odd Duke or the odd producer-punching-star-of-Amazon as the rule, rather than the exception is a view I might expect from far-left, but not our party. It is an out of touch cliche.
These are facts. If you’ve worked in agriculture, you know ‘em. Profit in farming is as rare as Britain’s mysterious big cats. Apparently measures which come close to allowing farms to turn over a profit are ‘unfair’. Food production is essentially in the hands of a cartel of supermarkets that control prices for the end-users. Wool and wheat are two such commodities. One could the likes of Llewellyn do to increase his economic productivity when the bus sitting on his margins was parked by Tesco?
What is the point of chasing Britain’s impoverished farming community when those who control the market are getting away scot-free? If we need to find more money than maybe we should try skimming water from the lake, not the half-dry puddle? Supermarkets force poverty onto many of Britain’s farmers.
If this measure does go ahead, and the farmers are proved right, small business around the UK will collapse. As nature abhors a vacuum, the winners will doubtless be the large agri-business that can afford it. Soon the factory farms, the 20,000 acres estates will be normalised.
We’ll miss Llewellyn when’s he gone. But by then it’ll be too late. And he won’t come back. But mega-farm owner James Dyson – well I bet he’ll be happy. At least he can afford the changes. The IFS claims:
Some relatively simple tax planning will ensure that many farms worth considerably more than £2 million will not be liable for tax.’
If the farmers are right about what will happen to their industry only the richest will be able to afford it. Mr Dyson’s success will not lead to a decline in agricultural land prices, as the IFS strangely claim. It will pass into the hands of fewer people than any point in our history. Fewer owners mean less competition, meaning higher prices.
I don’t accept Sir Keir Starmer’s assertion that he knows best. Neither should you. I think professionals in their field (literally) know what is best for their field.
The need for a pragmatic and evidence-centered party has never been stronger. Seldom have I felt so proud to call myself a Lib Dem.
* John Jewers is a former councillor in the market town of Woodbridge. I have a master's in philosophy and public affairs, and a former researcher for the National Farm Research Unit. I am currently a cameraman and sound recordist based in East London.
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31 Comments
i fail to understand why alternatives are not being explored. Many good ideas have been suggested over the last few weeks of far simpler measures that will more precisely target the wealthy tax avoiders without forcing family farms to sell up or split up. I suspect intransigence on the part of government and vested interests of wealthy NFU and CLA leadership. Am I right?
” Mr Dyson’s success will not lead to a decline in agricultural land prices, as the IFS strangely claim. ”
This is an interesting statement. Firstly, I suggest there is an element of truth, agricultural land prices will decline, as fewer will be wanting enter the market as farmers and farm the land. However, this will have the effect of accelerating the sale of agricultural land for development.
However, all of this misses a very important point, if we need agricultural land to be farmed – we all need to eat and relying on the rest of the world to feed us is a very high risk strategy – it doesn’t really matter what the price of agricultural land is, we just need an efficient and cheap way for agricultural land to be passed on from farmer/custodian to farmer/custodian and which makes it very difficult and expensive for agricultural land to be transitioned to development land.
The idea that £3 million tax free isn’t enough for people seems ridiculous to me.
People should pay their taxes, and “being a farmer” isn’t a good enough reason for people to inherit millions tax free.
John – there are two things you don’t tell us in your article. One is whether Llewellyn has children, and the second (assuming he does) is if they actually want to go into farming? If the answer to either of those questions is no then I suggest that his land will get sold for those holiday homes to get built (if they can get planning permission), and if that were to happen should the beneficiaries of his Will be allowed to cash in tax free?
I am one of those strongly opposed to our Party’s position on this, but I am not naive enough to think that farming is profitable or that all farmers are rich. British farming faces many challenges and I encourage us to address them, but inheritance tax is neither the biggest or the most immediate.
By all means propose amendments to Labour’s plans if you believe farming should be a heriditary pastime passed down through the generations, but blanket opposition to the IHT changes very much benefit some very wealthy people.
@Andrew. But they are not ‘inheriting millions’.They are inheriting assets which they can only continue to operate if they keep them. To ‘inherit millions,’ they would have to sell those assets – and be left with no farm.
@Nick. Farming is a ‘hereditary pastime’??? Seriously??
You guys do realise that tenant farmers are also likely to be casualties of this ill-thought-out tax change, by the way? When their landlords sell up to avoid or pay the tax?
@John, thanks for this post. And don’t be discouraged by the comments of people who don’t get it. I, too, am proud the party is ‘raising the banner’ on this one.
Why not defer any tax bill until the farm is sold on the open market?
This way the Govt will get their money eventually, but ‘eventually’ could be many decades, even centuries, if the farmers’ descendants want to continue farming.
This should apply, as an option, only to individual owners who are engaged in farming themselves. Any landlords should have to pay the tax as normal. Corporations owning land need to be taxed on annual basis as they won’t probably won’t die as would an individual farmer.
@ Cassie
“You guys do realise that tenant farmers are also likely to be casualties of this ill-thought-out tax change, by the way? When their landlords sell up to avoid or pay the tax?”
Not necessarily. Someone will need to continue to farm the land (assuming it can be done profitably). If the land is sold with the tenancy in place (which happens) the tenant stays put until the end of the tenancy. More “modern” tenancies tend to be very short, but the older kind give very significant security of tenure at a low rent – good for tenants, but this resulted in very little land coming to the market for rent.
What is so disappointing about the budget is that Labour, knowing taxes would have to be raised, inexplicably (reform taking half tory vote) tied their hands by saying they weren’t going to raise the 3 taxes that produce 80% of government revenue). The tractor tax is poorly targeted, raise little revenue and has united the rural community against the government. Increasing employers national insurance, given its extent, is even worse. Increasing the wedge between the employed and self employed is unfair and encourages tax evasion. I could go on but labour have messed up the budget big time. I’m delighted the libdems are championing the tractor tax issue.
@Cassie – the last Government review into the future of family farming found that 84% of farmers were operating farms that had been handed down at least once, and only 8% were first generation not from a family farming background. So yes, hereditary (overwhelmingly)…
While it is unlikely that that the local council would actually allow the building of holiday homes there, I imagine you could build enough on unproductive parts of a mountain to pay the inheritance tax without reducing the agricultural output.
Let’s assume an estate on death valued at £4million.
Ordinary taxpayer will pay IHT at 40% up to £1,470,000 IMMEDIATELY or they can’t get access to the estate. [could be reduced to £1,340,000 by spousal and other allowances]
Farmer will probably get allowances of around £3million and pay IHT at 20% £200,000 over 10 years.
Ordinary taxpayers might be forgiven for being cross about such generosity to farmers. Hardly fair is it?
@Mick Taylor
How many ‘ordinary taxpayers’ have estates valued at £4 million (or over)?
Nonconformistradical. Not many, but the people supporting farmers have used it as a yardstick to show how unfair the new tax is. [See Phil Benion on another thread for example]
In truth, not many people pay IHT anyway, but lots of people THINK they will. The big factor in IHT is the value of housing. An increasing number of people are dragged into IHT because their property value has rocketed, especially in the SE.
I could have done similar comparisons for estates of £1million where ordinary taxpayers pay up to £270,000 in IHT but farmers pay nothing.
@Mick Turner
Obviously you have little experience of managing and forecasting cash flow.
I would also suggest that most non-farming people with estates liable to IHT also have the flexibility to realise assets, invest in alternatives and earn improved returns where they see such opportunities.
If I suddenly received £3M out of the blue, would I buy a farm? Not if I wanted a decent return. And not if it was to be my only source of income.
@Mick Taylor
“The big factor in IHT is the value of housing”
I agree it is for the majority of people – i.e. for all except large landowners.
What I don’t understand is what is being taken into account when calculating assets for a farm. Does it include the value of the farmhouse where the farmer may be living?
@Nonconformistradical. Calculation of the value of an estate includes all the property. In that farmers are no different from anyone else.
@GrahamJeffs. I was for some years a venture capital manager, so your assertion about my experience is wholly incorrect.
I have not ever suggested that the government’s policy is correct, but tried to point out the unfairness of a policy that gives wildly different IHT tax bills to farmers and non farmers for the same value of estate.
Most of the small farmers that I have known (quite a few) have not relied solely on the farm for their income and they would not in any case be liable for IHT. Whether or not you think that farmers should at least pay some IHT, it is surely unreasonable for the wealthy landowners who will definitely pay the new tax to be frightening the majority of farmers who in all probability will never do so.
@Tristan, ‘not necessarily’ isn’t exactly reassuring, is it?!
@Nick, It wasn’t ‘hereditary’ I was challenging, but the frankly insulting choice of the word ‘pastime’.
@Mick. ‘Ordinary taxpayers’ are selling assets that can be sold without affecting their livelihoods. And paying tax on unearned income. Farmland and Great Aunt Maud’s house are chalk and cheese.
And the reason the farmers I know don’t rely solely on the farm for their income is that margins are so small, they have to find other income streams to keep afloat.
Farms produce food. We all need food. Increasingly, we need domestic food security. That, in the end, is what absolutely does make farmers ‘different from anyone else’.
So, as with so many things that emanate from politicians, inadequate consideration has been given to the ramifications of their policies.
What has happened is that in trying to address one issue, another has been created. It’s clumsy – at best – and it isn’t going to help agriculture in general. Agriculture should not have to be a sideshow
“Farms produce food. We all need food. Increasingly, we need domestic food security. That, in the end, is what absolutely does make farmers ‘different from anyone else’.”
This is a key point.
Mick – are you suggesting that we should place the same value to society on farmers (whose occupation, by the way, is rated as a dangerous one) and on people who run gambling businesses (which may result in significant harm to individual punters sucked in to the business)?
Yet another ‘Poor Little Farmers’ article; the use of the term ‘Tractor tax’ removed any hope of reading a balanced article…
Regarding ‘food security’ it has been well over a century since this country could feed itself…Under half of the actual food on plates is produced in the UK, including the majority of grains, meat, dairy, and eggs…Even during the war with a far smaller population, strict rationing, and ‘Dig for Britain’ we couldn’t feed ourselves…
Why are farmers more entitled to pass on their business to their sons/daughters than those whose families ran the butchers, bakers, greengrocers (and candlestick makers) that the advent of the supermarket forced to close?
BTW..I use the term ‘business’, and not ‘farm’, because live in a rural area dominated by farms and I well remember being told by a local farmer, when I questioned the morality of using ‘Gangmaster Labour’ considering the awful accommodation and long hours of those employed, “Farming”, he told me, “Is a business like any other and I use the most cost effective methods to maximise profit and sentimentality doesn’t come into the equation”..
It now seems that sentiment is a coat that farming can put on and take off at will..
It’s not surprising that Expats objects to the term ‘Tractor Tax’. It makes everything sound a bit more cuddly. Of course the current proposed IHT changes are not a tax on tractors or their fuel. In fact farmers get a very good tax deal on fuel not available to the rest of us.
Farmers are allowed to use red diesel for ‘agricultural purposes’. Red diesel is typically cheaper than regular diesel and petrol because of its lower fuel duty rate. Joe public has to use white diesel :
Red diesel: Has a duty rate of 11.14 pence per litre
White diesel: Has a duty rate of 57.95 pence per litre.
@nonconformistradical. I am making no value judegments at all about value to society. It just seems to me that IHT (or any other tax) should fall equally on people, so in the case of IHT everyone liable should pay the same tax on the value of their estate, regardless of who they are or what their business is.
The rich land owners have conned small farmers in to thinking they will be paying IHT, when in fact most of them won’t. The reality is that if your farm is worth less than £3million, you won’t pay IHT at all and if it worth more you will pay 20% (not the 40% everyone else would pay) only on the value of the estate above £3million AND you will have 10 years to pay it, whilst everyone else must pay immediately.
What has been sadly lacking in the debate on IHT for farms is verified facts. Lots of distortion and downright lies about the number of people affected. I actually am quite annoyed that so many farmers have been cause a lot of unnecessary worry and stress by the rich landowners trying to stop themselves having to pay tax, by convincing small farmers that they too will be liable, when most of them won’t.
There seem to be a fair few comments that hint that IHT should be lower for farmers because farming produces so little income. But those seem like separate issues to me. We should certainly be asking why it’s apparently so hard to make a good profit by farming and producing food (supermarkets’ oligopoly? price competition from abroad?) and what can be done to fix that. And having done that, then perhaps there’s no reason for IHT rules and rates for farms to be different from IHT for any other business-related asset.
@Simon R
“We should certainly be asking why it’s apparently so hard to make a good profit by farming and producing food (supermarkets’ oligopoly? price competition from abroad?) ”
I’ve seen comments in the media about the pressure on prices exerted by the major supermarkets.
@expats. Sentimentality doesn’t come into it. And your farmer/corner shop comment is as chalk/cheese as farmland/Granny’s house.
No, this country ‘can’t feed itself’. That is worrying: not a reason to be careless about reducing what we do currently produce.
1. Geopolitical instability means disruptions to the food chain are becoming more likely.
2. Climate change is already causing production and supply problems
3. Diseases and pests, often related to 2, are also affecting global food production.
4. So far, ‘all’ we have seen as a result of the above is soaring prices.
5. Brexit red tape deters EU producers from exporting to Britain. Import checks have repeatedly been postponed, because our successive governments realise how damaging they would be.
In short, it’s unwise to assume that because for years we have been able to import endless quantities of food means we will always be able to do so.
@Cassie 9th Dec ’24 – 5:35pm…@expats. Sentimentality doesn’t come into it. And your farmer/corner shop comment is as chalk/cheese as farmland/Granny’s house….
Why the chalk/cheese difference..Many small shopkeepers lived on the premises and the attachment to any family business, be it a few family run shops or a family run farm, is the same; we’d all like to pass our business on to our children . If you can’t make a decent living running a farm or shop you are in the wrong business..
As for sentimentality?? If an article about a couple of 80yo’s (who won’t be affected by the IHT anyway) running a farm their ancestors have farmed since the late stone age isn’t sentimentality then I don’t know what is…
The exemption from IHT on farms is a recent innovation (at least to me) and, with the generous ‘strings’ attached to these IHT proposals, the brouhaha seems, as Mick Taylor 9th Dec ’24 – 1:00pm points out, the wealthy landowners mobilising ‘cannon fodder’..
BTW ..How many farmers will die per year and how many will be affected? The figures produced by the NFU are at least as doubtful as those by the government…
Farmers do hard and vital work, and get hit by many difficulties and uncertainties. So should we:
(1). Create good support systems for farming incomes which will properly reward them for their hard work and the risks they take.
or
(2). Provide tax loopholes which will let farmers sell out for large capital sums. That way, we can hope that farmers will soldier on even though we don’t really pay enough for the food they produce, because they know that if necessary, they could cash up and retire rich.
My vote is for option (1). Since Thatcher’s time, governments have been relying on the irresponsible option (2). Labour have tried to make a necesssary change, though unfortunately they have made a pig’s ear of it (excuse my farming pun…)
This is a typical example of governmental officials trying to solve a problem without defining it precisely enough, or researchig it professionally. We have several problems a) low income and high costs of medium-sized and smaller professional farms in the UK b) a bungled system of farm support following Brexit c) regulatory complexity for ‘incidental’ farming (domestic households with substantial land but non-farm income, wishing to make use of their land for food production d) large asset owners and asset managers using the addition of farmland to avoid IHT and other taxes e) economic concentration in food retailing & wholesaling in the UK (and weak competition insttutions & laws f) poorly organised education & training in agriculture, land management and food production (a serious mismatch betwen demand and supply of education in relevant skills.
“This is a typical example of governmental officials trying to solve a problem without defining it precisely enough, or researchig it professionally.”
Seconded.
Of the issues in the list – where is (e)?
Of the people mentioned – category (d) doesn’t get any sympathy from me – but that is the category where the authorities might be able to do their most effective work – given the potential sums of tax which might be being avoided. HMRC needs to devote more resources in getting these people (who can afford highly knowledgeable accountants to find loopholes in the tax rules) to pay up – and also putting the said accountants out of business.
Tax avoidance may be legal but it’s immoral. Close the loopholes. Not practicable to close them all at the same time, but if nothing is done to symplify our overly complex tax system avoidance will only get worse.
@nonconform.. I don’t think tax avoidance is immoral. By all means change the law if a good reason can be argued. There has been no thought or planning for the IHT changes. Tax evasion certainly is illegal and probably immoral and increasing the employed/self employed wedge will only increase it and has to be a wrong headed.