The government’s partial reversal on the controversial “farms tax,” as it was dubbed by critics, has been welcomed by those who campaigned against the imposition of a 20% inheritance tax, initially slated to begin next April.
The revised policy will now exempt approximately half of the farms that would have been subject to the tax.
Given the government’s staunch defense of the policy in the 14 months since its announcement in last year’s Budget, questions arise: What prompted this shift, and why now?
Undoubtedly, persistent protests, including the recurring tractor convoys that descended upon Parliament Square with horns blaring, played a significant role.
Beyond the public demonstrations, the National Farmers’ Union also engaged in discreet diplomatic efforts, holding discussions with Downing Street and the agriculture department. Reports suggest that negotiations centered on mitigating the policy’s impact rather than its complete elimination.
However, other factors were likely at play.
Last year’s Labour election victory resulted in an increased number of the party’s MPs representing rural and semi-rural constituencies.
Sources indicate that some of these MPs had been actively lobbying for concessions behind the scenes.
While only one MP voted against the inheritance tax policy, over 30 abstained from a parliamentary vote earlier this month, signaling their reservations.
The precise timing of the government’s about-face remains a matter of speculation.
One of the dissenting MPs from rural areas noted that conversations with ministers had become more constructive this month, although they were not informed in advance of the announcement.
Some observers believe that Prime Minister Keir Starmer’s recent appearance before the liaison committee, comprised of senior MPs who chair cross-party parliamentary committees, also influenced the decision.
During the session, Starmer faced pointed questioning from Labour MP Cat Smith and Liberal Democrat MP Alistair Carmichael, both of whom alluded to the possibility of farmers contemplating suicide – or, in Smith’s words, “actively planning to expedite their own deaths” – to ensure the transfer of their family farms before the inheritance tax took effect.
The prospect of personal tragedies and the resulting negative publicity would have been clearly conveyed to the prime minister.
Downing Street is reportedly eager to regain momentum when Parliament reconvenes in January, and resolving this contentious issue may have been deemed a necessary prerequisite.
The Conservatives have criticized the timing of the policy change, alleging that it was “sneaked out” while MPs were away and unable to hold ministers accountable.
Such a reversal during a parliamentary recess does not project confidence from a government holding a substantial majority of 400 out of 650 seats.
While some Labour MPs have expressed relief that the government has listened to concerns, others question why it persisted with a policy that was projected to generate relatively little revenue.
The policy change is estimated to cost £130 million, a small fraction of the approximately £900 billion generated annually through taxation.
Furthermore, with Labour trailing in the polls, concerns remain about the government’s ability to effectively shape the political narrative.
A pattern appears to be emerging: the Treasury announces revenue-raising policies, followed by public backlash and internal Labour dissent, culminating in a partial reversal after the political damage has been sustained.
Examples include winter fuel, welfare reform, and now, family farms.
While the policies may have been adjusted, questions about political judgment persist.
Shropshire farmer Richard Yates described the decision as “massively unexpected.”
Farmers in Cornwall have stated that the government’s tax climbdown is merely a step in the right direction.
County Down farmer Libby Clarke has welcomed the government’s announcement but emphasizes the need for further changes.
The government maintains that it has listened to concerns and raised the tax threshold on inherited farmland to £2.5 million.
The government had previously intended for inheritance tax to apply to farms valued at £1 million or more.