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November 6, 2024 - 2:00pm
Labour’s recent inaugural budget has shown that the party’s top brass are not quite the squeaky-clean “competent” representatives of the Civil-Service class that they billed themselves to be. Instead, they are class warriors. But rather than representing the interests of labour against capital, the Starmerites represent the short-term interests of the urban metropole against those in the provincial breadbasket. At least, that is what the new tax on farms suggests. The tax also puts British food security — something which should be a priority in today’s uncertain world — at grave risk.
From April 2026, any inherited agricultural assets worth more than £1 million will have to pay an inheritance tax of 20%. The Treasury has said that 72% of farms will not pay this tax, but the National Farmers Union (NFU) disagrees. The farming industry is claiming that 75% of food produced in Britain will be hit by the new tax, and that the impact on British farming will be dire.
The problem is that farming operates on razor-thin margins. Most farmers are asset-rich and cash-poor, meaning that, while their work keeps us all alive, it is not an industry that can absorb significantly higher costs of production. Farmers must squeeze every last penny of profit out of the land. On Sunday, NFU president Tom Bradshaw wrote in the Financial Times that agricultural margins are often less than 1%. This means that a plot of land worth £1 million will often yield its owner less than £10,000 a year. An investor would be better off putting their money in a standard savings account. When faced with a 20% tax to pass the land on to their children — the generational value of which cannot be measured merely in cash — many farmers will rationally choose to just pack it in and sell the farm.
Ultimately, this will mean less food production in Britain. The country is already a major food importer, as British readers will have noticed when buying Irish beef or Spanish tomatoes in the supermarket. Britain currently produces about 60% of the food needed for its own consumption, which is down from its postwar peak of around 80% in 1985. This is low by international standards. For example, while imports have increased, the US is a net food exporter and puts great strategic stock in its food security. The statistics show that the British model is closer to Japan and South Korea than it is to France, another net exporter.
It is an odd time to further undermine British food security. Not a day goes by where we do not hear a Whitehall securocrat tell the public that Britain needs to prepare itself for further global conflict. Surely, nothing could be more important for Britain’s economic national security than ready access to domestic food. And yet Keir Starmer’s government — which explicitly touts its alleged focus on security — is undermining the already teetering British agricultural industry.
What explains this seeming contradiction? It is becoming increasingly hard not to conclude that the Labour government is acting mainly as a conduit for various factions in Whitehall. When Chancellor Rachel Reeves increased the defence budget by £2.9 billion, it was less the result of a strategic vision than it was a gesture to please one Civil Service faction. The tax increases on farmers are to fund this and other expenditure, including the pay increases to public-sector workers, another interest group that has the Government’s ear.
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SubscribeHow much do the commenters below know about farming as a business? In the 1950s a family farm which could sustain the farmer plus one or two employees might be 100 acres, depending on crop and livestock mix. Now with mechanisation and relentless downward pressure on product prices, it would be 3 to 5 times that size to support one family without employees. At current land prices that is worth £3 to £5 million, well above the proposed exemption level.
There seems to be this belief that IHT exemptions are the main factor behind high land prices. That doesn’t explain the huge difference between prices for different types & grades of land. Anyway, forestry is a much better tax shelter, especially once you factor in carbon credits. Prices have been driven up by corporate investors expecting low cash returns but long term capital gains.
Pilkington’s (correct) argument is that the policy will result in a transfer of agricultural land from family businesses to large investors, who will employ farmers as tenants. That has rarely worked well in the past. As, effectively, employees, farm tenants will expect to be paid better than they are as owners whose families expect to benefit from future capital gains.
The eventual outcome will be a shift towards tenant farming with less working capital in machines, livestock, etc and lower productivity. Unless agricultural prices rise, the rate of conversion from farming to forestry (already high in Scotland) will accelerate and food production will fall.
For a government dominated by urban interests that may not matter. Until the sentimental tendency realises that the combination of corporate landowners and tenant farmers have no interest in preserving all of the picturesque features of the traditional landscape and habitats, unless they are paid handsomely for the work and loss of output involved.
One shouldn’t be sentimental about family farming. It is hard and poorly rewarded work. But some people love it. Around the world, family farms are probably the best form of agricultural land management. Promoting a transfer of land to corporate landowners is just daft. But then what do people with no experience beyond urban London know?
This labour government is a disaster, in so many ways; they are stupid, ignorant, spiteful, envious and a national liability.
I have just heard from some farming friends that there are moves afoot amongst farmers to stop the spreading of human waste on their fields as a fertiliser substitute. If this is true then the government will soon find themselves deep in genuine shit, because the water companies don’t have the processing capacity to otherwise deal with it.
Shortsighted class-driven politics.
When the Dutch government tried to shut down half the country’s farms it didn’t go well. In fact it upended Dutch politics, so Starmer is trying to implement the WEF policy in more roundabout way.
The man said it himself in an interview with Emily Maitlis, when she asked: ‘Westminster or Davos?’, he replied ‘Davos’ – without a nanosecond’s hesitation.
What threatened national security was the consistent cuts in the defence budget of the last Govt. Ex Ministers even admitted the Armed services had been hollowed out. We have to go back to Blair and Brown for 2.5% of GDP to be spent on Defence. Starmer and Reeves confirmation that is now factored into the expenditure plans deeply embarrassing for the Right so it has to complain about how they’ve done that.
They’ll be no exodus of real farmers. It’s the v rich doing their usual to protect themselves. Read the details of the proposals and you’ll know the gripes are hyperbolic nonsense put out by vested interests.
We have to go back to Blair and Brown for 2.5% of GDP to be mis-spent on Defence.
No doubt Starmer and Reeves will borrow the money just as Blair and Brown did.
We could do with a little more scepticism on here. If the rich tax avoiders tell us that a policy which hurts them will also hurt people we might have sympathy with – then we ought to smell a rat.
It’s the reverse of the “the only way to help the poor is by helping the rich” trick. To protect the poor, we must protect the rich – say the rich!
Is that because farms which are sold cease to be farms? I’m not quite following here. Do they become wasteland, housing estates? What happens to them?
Housing estates, solar power, timber farms or just someplace to put all those unwanted EVs?
Thats not what we would normally mean by a margin. Rather it is a return. Margins are based on the costs involved in producing the item and the price it is sold for. So the profit margin on a yield of £10,000 might still be high.
1% per year on a passive, almost risk free investment isn’t bad I guess.
However, if you’re the person doing all the work for 10k pa (perhaps more as you get to keep some of the wages that were a cost to the passive farm owner), that’s not so good.
A land value tax would’ve been better than inheritance tax. ie a smaller, manageable amount each year rather than a large, unpayable lump once a generation.
It depends on the size of the plot and the amount of Labour involved in farming it. I’m also not sure how accurate or representative the figures are.
I think we need a bit more clarity on this, and (until we have it) a bit less outrage. From what I can tell, this will not hit the average family farm so much as rich people who have invested in land in order to deliberately avoid inheritance tax. Clearly that is a loophole which needs to be closed.
There is another possible outcome that the Labour Government may not have thought of: family farms are sold to agricultural corporations. It would be just like Starmer to want to punish the British for voting for Brexit by putting agricultural land in the hands of Monsanto et al.
Bill gates has bought up huge swarthes of the US farms…. it is naive of us to think that won’t happen here, if small farms are forced to sell….
Who else gets IHT exemptions?