Why are the farmers ploughing ahead with a major protest next week?

Rachel Reeves’s Budget had a fair few people in a spin but none more so than those who till the land. With a change to inheritance tax having potentially devastating consequences for family farms, large numbers of farmers are set to pay a visit to the politicians in Westminster. Sean O’Grady lays out the situation so far

Not so very long ago, agricultural property relief (APR) from inheritance tax was one of the more obscure corners of the UK tax code. Now, with changes in the Budget reducing the previously completely tax-free treatment, the farmers are angry and they’re preparing for a massive demo in London on Tuesday 19 November. The issue has been clouded by some confusion about figures, a considerable amount of passion and, now, a public row between two government departments. While the Treasury needs to raise some cash, the Department for Environment, Food and Rural Affairs (Defra) is concerned about the sector and the many votes Labour picked up in previously unpromising rural and semi-rural constituencies. It looks like it is becoming the defining political battle of the autumn…

What’s the problem?

Fairness dictates that different people and classes of people should pay the same kind of tax on their income, capital gains, inheritances and so on, with few exceptions. We’re all faced with the same income tax allowances and rates, for instance, regardless of family circumstances or occupation. Similarly, the argument runs, a farmer inheriting, say, an £8m estate should be liable for the same tax bill as someone inheriting a £8m house or painting.

The contrary argument is that farming is special in the sense that it is usually asset-rich but cash-poor, and an inheritance bill of, say, £1m would be ruinous for a farm that only generates £100,000 income, even under the easy instalments scheme. Farms would have to split up, to the detriment of their viability, food security and management of the countryside.

Why is there an argument in Whitehall?

Because Defra is getting it in the neck from the farmers, and, reportedly, wasn’t consulted by the Treasury about this fundamental tax change. There is also a disagreement about the number of farms affected. This may just be the difference between the number of farms that claim APR every year and the total number of farms that would, one day, be potentially affected – many more.

Are the farmers hard done by?

On the whole, yes. They’ve had to contend with the transition from the EU Common Agricultural Policy to a domestic system; bullying by the big supermarkets; labour shortages; rocketing energy bills; environmental obligations; increases in the minimum wage and employers’ national insurance contributions; and the gradual erosion of rural infrastructure – post offices, shops, village pubs, bus services, rural thefts, being off the electricity grid when fuel oil boilers are to be lashed out, housing overdevelopment, perennial floods and sometimes poor internet connections. The free trade deals struck by the previous government with Australia and New Zealand will also inflict long-term harm.

How will they protest?

It will start with a rally but more militant and disruptive action is certainly possible. Looking at the tactics used in continental Europe, past Countryside Alliance campaigns in favour of bloodsports, and the UK fuel protests of 2000, that could include blocking motorways or cutting London off with tractor convoys; picketing food and fuel depots; withholding non-perishable foodstuffs; and spraying stinky slurry around Westminster. It could become less about tax allowances and morph into another “culture war” – town versus country, and a battle of wills between the government and the farmers. The likes of Jeremy Clarkson and Nigel Farage will be placing themselves at the head of the movement.

What’s the answer?

Some way has to be found to close down what had become a blatant tax dodge by the super-rich – a cynical vehicle to pass on their fortunes to their offspring tax-free – yet still protect the archetypal family farm passed down through the generations. There are some other amendments to the new regime suggested by Defra but so far rejected by the Treasury; for example, exempting older farm owners who cannot reliably now use the provision for a tax-free transfer of an estate seven years before their death. A cap on the total tax relief could be set. The changes could also be postponed for longer, or phased in over many more years. A very long time limit could be set before a beneficiary can sell the land and cash in on any inter-generational capital transfer.

Who will win?

As with the cut to the pensioners’ winter fuel payment and the hikes in employers’ national insurance, Reeves seems in no mood to change her plans. The chancellor is displaying her “ironclad” credentials to the electorate and, provided Keir Starmer and the parliamentary party stick by her, the legislation will be passed and that will be that. However, the protests could still grow more serious, and that favourite newspaper cliche, the “winter of discontent”, will start to appear. In a worst-case scenario, the police and even the army will have their work cut out if vital fuel and food supplies are disrupted by tractors and the kind of mobs we saw in the summer riots. It may fizzle out; it could turn ugly. Public opinion could go either way. The question for Reeves and Starmer is whether they feel the fight is worth it.