Hundreds of farmers gathered in Westminster today, chanting “no farmers, no food” outside Downing Street, as Prime Minister Sir Keir Starmer faced tough questioning in the Commons over proposed changes to inheritance tax. These changes have sparked significant concern, particularly among those in agriculture.
Rachel Reeves’s planned overhaul of inheritance tax reliefs for farmers and family businesses could potentially cost the Treasury nearly £2 billion by 2030, instead of raising the anticipated revenue, according to a new analysis.
Set to take effect in April, reforms to Business Property Relief (BPR) and Agricultural Property Relief (APR) were initially projected to generate £1.8 billion by the end of the decade. However, modelling by CBI Economics, mandated by Family Business UK, suggests the opposite. The proposed tax, a 20 per cent charge on inherited farms and business assets worth over £1 million, might reduce investment, decrease jobs, and stifle economic growth.
The study reveals that more than 60 per cent of family businesses and farms intend to cut investment by over a fifth due to these changes. About a quarter have started decreasing their workforce. By the parliamentary term’s end, these changes might jeopardise over 200,000 jobs, severely affecting regions like Yorkshire, the East of England, and Northern Ireland.
Neil Davy, CEO of Family Business UK, voiced concerns that these reforms might hinder the Government’s growth agenda. He criticised the changes for potentially damaging family businesses and farms, core units of the British economy.
CBI Economics anticipates that reduced economic activity could diminish GDP and employment, leading to a negative fiscal impact. This might leave the Treasury £1.9 billion worse off by 2030.
Industry leaders advocate for pausing or halting the reforms, warning of their unintended consequences. The National Farmers Union’s president, Tom Bradshaw, stresses the report’s significance and its warning against investment cuts and job losses, especially when rural economies need bolstering.
Mo Metcalf-Fisher of Countryside Alliance denounced the tax changes as “foolish and irreversible,” citing the impending detrimental effects on agriculture.
In Westminster, a growing backlash arises due to concerns about the reforms’ psychological impact. There are heartbreaking instances, such as 78-year-old John Charlesworth’s tragic death last year, influenced by worries about these changes’ effects on his family business.
The Conservative Party has also sharply criticised the policy. Shadow business secretary Andrew Griffith labelled the reforms a breach of election promises, suggesting they would penalise entrepreneurship. He vowed that a Conservative administration would overturn this measure.
The Government defends the policy as proportional. According to a Treasury spokesperson, three-quarters of estates will remain unaffected by the tax. Affected individuals will benefit from reduced rates and can pay over a decade interest-free, balancing public service funding support.
Labour’s fiscal strategy, including inheritance tax reforms, has ignited a broader debate. Tougher stances towards the UK’s non-dom tax regime have emerged; separate analysis by former Treasury economist Chris Walker shows that at least 10% of non-doms have left the UK.
With comprehensive reforms to inheritance tax, capital gains, and non-dom status, questions arise about Chancellor’s plans’ effectiveness in raising revenue without undermining economic growth.
Family Business UK highlights the need to rethink these potential changes before they inflict long-term unemployment, investment stagnation, and damage to the rural economy.
