Tax changes in budget last straw for UK farmers after ‘years of being squeezed’

  • 11/8/2024
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In the next few weeks tractors full of angry farmers could roll through the stately streets of Westminster. They have had enough, they say. The change to inheritance tax in the government’s budget last week was a blow – but it was also the most recent of a long series of blows. This is, apparently, as much as they can take. Rachel Reeves stirred up anger when she made a surprise announcement at the budget that farmland worth more than £1m would be subject to inheritance tax. Since 1992, agricultural property relief (APR) has meant family farms have been passed down tax-free in a policy intended to bolster food security and keep people on the family land. This is just the latest policy to affect agriculture over the last few years. For decades there had been anger over painful deals with supermarkets which, farmers said, forced them to cut margins to the bone. Then came Brexit, which brought broken promises over trade deals with Australia and New Zealand allowing cheap meat produced to lower standards into the UK and incensing farmers who felt undercut. It also meant a transition away from the subsidies of the EU’s common agricultural policy to a scheme in which farmers are paid for environmental goods, the delivery of which was botched and delayed. Farmers have also faced new export challenges and wrestled with access to much-needed seasonal workers. Farmers have also felt abandoned when extreme weather conditions caused by climate breakdown have wiped out entire crops, while inflation has made input costs such as fuel and fertiliser rocket. The National Farmers’ Union (NFU) president, Tom Bradshaw, said: “After enduring years of being squeezed to the lowest margins imaginable, farmers are grappling with sky-high production costs for fuel, feed and fertiliser. Coupled with significant post-Brexit policy shifts and increasingly extreme weather conditions, there is nothing left for our nation’s food producers to give.” The NFU is asking the government not only to reverse the changes to inheritance tax, but for a swathe of policies. They want a statutory commitment to ensure the UK’s self-sufficiency does not drop below its current level, ensuring food imports are produced to the same standards as those that British farmers are required to meet. They also want a review into supply chain fairness because farmers’ margins have been squeezed as supermarkets make record profits. A recent study found farmers take home less than a penny for every block of cheese or loaf of bread sold in the supermarket. The union is bringing 1,800 of its members to Westminster on 19 November to meet MPs and it is expected other farming groups will stage a more “militant” protest on the same day – although this has not been sanctioned by the NFU. Some farmers have even threatened to go “on strike” to disrupt food supplies. Reeves’s budget hit particularly hard because many farmers feel unfairly blamed for an issue caused by a tax loophole exploited by the mega-rich. As a result of that loophole, the price of land they’ve owned for generations has skyrocketed as investors have bought up farmland as a tax wheeze. As a result, if farmers pass the land on to their children, the tax bill could eat up most of the income made by the farm. Will White, a farm sustainability coordinator at Sustain, said: “Land values have soared, partly due to wealthy individuals exploiting the system, but it shouldn’t be farmers – particularly those committed to nature-friendly farming – who end up paying the price for this. Land should not be a tax haven for the wealthy. But this policy needs to find a way to distinguish between farmers working to provide public goods and nutritious food, and wealthy individuals seeking a tax break.” Farmers also think the government is not being straight with them about the policy; the Treasury claims the changes will only affect 28% of farms, but data from the Department for Environment, Food and Rural Affairs shows two-thirds could be caught by the tax. Martin Lines, the CEO of the Nature Friendly Farming Network, said: “The speed at which the government is implementing these changes, along with the short timeframe it has set out, is neither particularly helpful nor fair. Farmers have been given very little time to plan their succession and ensure they can transition effectively from the old tax scheme to the new one.” Some in the sector think it is fair to ask the wealthiest to pay their share. As many farmers make a meagre living and live in areas subject to cuts to GP surgeries and public transport, a more equitable system could be beneficial. Guy Singh-Watson, the founder of the organic vegetable box company Riverford, is a family farmer and grows vegetables on 60 hectares (150 acres) in Devon. He said that although he was angry about the tax at first, when he looked into it it seemed fair and that those complaining were the mega-rich. “Let’s be honest about where the loudest opposition to this policy is coming from and what their role has been on the value of our land,” he said. “The unintended consequence of the tax break given to landowners has been to inflate land prices and effectively exclude new entrants who are not substantial beneficiaries of their parents.” Singh-Watson said: “Land in the French Vendée – where I’ve owned a 300-acre farm for the last 15 years – is less than a 10th of the price of equivalent land in Devon, where I also farm. To be a farmer there [in France] you have to be deemed fit to farm by the local administration. I doubt whether those who are simply buying up our country to keep more money and assets for themselves would pass that test. As a farmer of 50 years I have campaigned vigorously to defend the UK’s family farms but it should offend all farmers with mud on their boots that these people are claiming to represent us when in reality they are the ones making farming less affordable for genuine farmers.” He said there is another way to raise money that would upset farmers less and be more equitable and raise billions rather than the £500m expected to be gained from the APR changes. Singh-Watson said: “Given that Reeves wanted to extract some of the £40bn in tax rises needed to rebuild our country partly from landowners, another way to do this could have been to look at the 10- to 100-fold increase in land values when planning permission is granted. Farmers who benefit from this uplift can pay no tax whatsoever if the funds are ‘rolled over’, ie reinvested in land. Taxing these capital gains could arguably raise more and would probably be far less contentious.” Another option, suggests White, is that the large agribusinesses and supermarkets which are responsible for the inequity in the supply chain could have been targeted instead. “While some farmers will have to pay more, supermarkets and large agribusinesses continue to squeeze every last drop out of the food supply chain, leaving polluted rivers and ever more minuscule margins for farmers,” said White. “This is a deeply unfair and extractive system. A fairer and more lucrative approach from government would be to start by taxing and better regulating the bigger players in the supply chain, where the real profits are made.” A government spokesperson said: “The government’s commitment to our farmers remains steadfast. It’s why we have committed £5bn to the farming budget over two years – more money than ever for sustainable food production. We understand concerns about changes to APR but the majority of those claiming relief will not be affected by these changes. They will be able to pass the family farm down to their children just as previous generations have always done. This is a fair and balanced approach that protects the family farm while also fixing the public services that we all rely on.”

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