Can farmers pitch a middle ground in Rachel Reeves’ tax plan?

After a series of angry protests by farmers since chancellor Rachel Reeves’ budget on 30 October, the government has faced further challenges to its controversial inheritance tax plans this month.

Last week all the UK’s major supermarkets voiced their support for a “pause” in the policy’s rollout pending a full review of its implications.

And this week the AHDB – a non-departmental public body sponsored by Defra – added weight to the case with research claiming more than three-quarters of typical farms could be impacted by the policy – significantly more than government estimates and slightly higher in fact than the NFU’s estimates.

Neither is the voice of objection from farmers quietening. After a nationwide ‘Day of Unity’ by the NFU last weekend, the union pledged to continue its battle against the “awful” ‘family farm tax’, which will see agricultural and business property relief reduced from 100% to 50% for businesses valued at more than £1m.

So, with a Treasury spokesperson adamant it remains “fully committed to the policy”, is there any possible compromise to be reached?

Shutting out stakeholders

The NFU – which handed over a petition opposing the policy signed by 270,000 members of the public to 10 Downing Street last week –  says it has solutions, though a spokeswoman argues it is “not helpful” to speculate “on what may or may not be possible”.

However, “what’s true is that nothing is possible so long as the Chancellor continues to refuse to meet with the NFU to hear our case. And we urge her, again, to sit down and discuss this policy with Britain’s farmers,” she adds.

In a week when Reeves laid out hugely contentious plans to expand Heathrow, Gatwick and Luton airports, the Chancellor’s determination to press ahead with the controversial policy is evident, suggests ex-NFU president and now Baroness Minette Batters. The reality is that “Labour won’t drop it anymore than they did winter fuel payments,” she says.

And the “unwillingness of the Chancellor to even meet the farming unions is a dreadful signal to be sending politically”, says Efra committee chair Alistair Carmichael MP. The Treasury “doesn’t recognise AHDB’s data” because its “eyes are shut and its fingers are covering its ears”.

Read more:

• ‘We’ll have nothing left’: Emotional reactions from Westminster farmers’ protest

• AHDB data torpedoes government position on Inheritance Tax impact

• Riverford founder slams supermarket ‘hypocrisy’ over IHT campaign support

• Tesco, Lidl, Co-op and Aldi call for ‘pause’ on ‘Family Farm Tax’

Talks permitting, one sensible compromise “would be for government to exempt those that leave the business to family members”, says Batter. “That would allow both sides to ‘win’ and stop the break-up of family farms.”

Carmichael agrees, and believes the “meaningless” £1m threshold for 100% APR and BPR has to go up, with a figure between £10m and £12m having the potential to target the wealthy people investing in farmland, while avoiding family farm owners.

In any case, the government, which is aiming to raise up to £500m from the policy, “probably won’t make that much,” he claims, “because of the tax mitigations available to those wealthy enough to exploit them. At the same time, as many farms can’t afford such tax planning, the current policy threatens to “ruin the future viability of family farming across the UK”. At a time when the government’s “main mission is growth, doing the sort of damage that they risk doing to rural communities and their contribution to growth is just madness,” he adds.

Carmichael calls for a more graduated rollout of the changes, rather than a cliff-edge in April 2026, and thinks IHT relief could also be used as “a carrot to encourage bigger land owners to give longer-term security to tenants”.

Such seemingly minor tweaks would “still achieve some of the aims the government wants in terms of tax take”, he argues.

Willingness to listen

The government has an opportunity to listen in its technical consultation on the plans, Carmichael says. It is set to be less extensive than the full consultation called for by the NFU, but it “could still be drawn out quite widely without the government losing any face,” he argues.

“Politically, this is something that’s not going to go away,” he warns. “They’re not going to have this in the finance bill until October or November, by which time, if things continue, they will have a lot of unhappy backbenchers.”

That potential loss of political goodwill from rural Labour MPs could ultimately “make it more difficult to get them to do the same thing the next time and the time after that”.

Given Labour’s intention to push through its growth agenda, those “diminishing returns” could well force it to think again, Carmichael suggests.

And if it doesn’t, it can expect much more criticism over the coming weeks and months. Can it afford that right now?