8
Min read
Nov 22, 2024
If you've been paying attention to Europe, you may have noticed that British farmers are in open revolt against the new Labour government over a new inheritance tax scheme, which they claim could destroy British family farms. Given that fears around farm consolidation exist all around the West, including in the US, and that the MAHA movement is causing a rethinking of farming practices in the US, we asked Fred De Frossard, of the Legatum Institute in London, to explain what is going on. He wrote the following article, which was lightly edited for style and clarity. The views expressed there are his.
British farmers are protesting the Labour Government’s plan to impose inheritance taxes on farms. These taxes will be levied at 20% for all agricultural property valued over £1 million, with some allowances between married couples. This was ostensibly done as a measure to stop “rich Londoners” – a rhetorical bogeyman – from buying farmland to avoid inheritance tax that they would otherwise pay on expensive London property. This decision has been met with genuine outrage and fear by British farmers, many of whom claim the Government’s figures are wrong, and that it will force medium-sized family farms into selling up.
This has escalated into a political war between the Government and the countryside, on a scale not seen since the early 2000s when the last Labour Government banned hunting and presided over the foot and mouth crisis, two events which wreaked havoc on British rural life. This latest difficulty is neither as tragic nor as painful – so far – but it shows how the wars between governments and farmers which have erupted over Europe and in their own way in the United States have finally come to the UK.
The Government claims that this will only affect the richest landowners, but they have made a foolish miscalculation around the threshold. £1 million will buy roughly 100 acres of farmland, give or take regional variation. The size of the average farm in Britain is just over 200 acres, so immediately it appears that this tax could affect far, far more farms than the Government estimates, or pretends to estimate. Factor in the added costs of machinery, equipment, and buildings to the value of the farm, and the number of farms affected is even larger. The Government thinks this will only affect 500 farms; farming industry bodies think it could be as high as 70,000 in reality. It is for this reason that when civil servants proposed a similar tax to previous Conservative ministers, it was refused. A threshold of £1 million was too low to avoid hitting many working farms, but raising the threshold would mean that tax would raise a negligible amount of money.
However this Government is going ahead with it, and hopes to raise a paltry £500 million per year by 2029 from this measure, on top of the £7 billion or so raised by Inheritance Tax generally. For context, His Majesty’s Revenue and Customs raised over £800 billion in tax revenue last year, so this would equate to far less than a tenth of one percent of the total tax take. To add insult to injury, Government ministers have said that farmers should welcome the fact that the Government is spending £5 billion on subsidies for projects to do with sustainable food production over the next two years. Some consolation for a farmer who might have to sell half his farm to pay death taxes. It would be far neater to scrap both these wasteful subsidies and Inheritance Tax altogether.
The policy could have a damaging effect on British farming. There are a number of likely outcomes, which could happen at different levels in different parts of the country.
First, there could be greater consolidation of farms into larger mega-farms. This might increase productivity; the vast arable farms along England’s east coast are incredible food producers, and benefit from economies of scale. However, these farms will incur even greater inheritance tax bills, which may well eat into the thin margins British farms make.
The more likely outcome, however, is the opposite of consolidation; instead, farms could be broken up into smaller parcels of land, which will be much less productive and far more likely to depend on subsidies. Expect to see small, sub-100-acre farms hoovering up government grants for fashionable ideas such as re-wilding, tree-planting, or setting up solar farms. This will not stop the tax avoidance either, as the incentive to purchase farmland under £1m will still exist, and the owner will be able to benefit from green subsidies offered by the government.
This will accelerate an existing and unwelcome trend in farming across the West. It is the stated policy of the Welsh Government – also run by Labour – to buy farmland and turn it into woodland for environmental reasons. Corporate giants like airlines and investment funds have been buying chunks of the British countryside and turning them into pine forests – even though pine is not native to the British isles and is incongruous in the country’s beautiful landscape – for carbon-offsetting, and BlackRock has been investing in solar farms in Britain for years. While there may be an economic case for solar power in some parts of the country, the relationship between the government subsidies for green projects on one hand, and punitive taxes on farms on the other hand makes it seem quite intentional that the state would rather farms be devoted to Net Zero and other green fads rather than food production. The expropriation of Dutch farms by the state in recent years comes to mind, as well.
This is a similar dynamic to what is happening in the United States, where Bill Gates has become the largest private owner of farmland in the country and is devoting much of this land to green causes. Where things differ between Britain and America is that while everything in the United States points towards greater intensification of farming and the continued dominance of factory farming, the British government’s policy is to essentially encourage the quiet withering away of farming. Indeed, at the Cop29 climate summit this month, Prime Minister Keir Starmer said that the British people will need to eat less meat and dairy to save the planet. The vegetarian Prime Minister is unlikely to shed a tear at the replacement of Britain’s historic, pasture-fed cattle farms by a subsidised pine forest.
Despite different features, British, American and European farmers are all facing assaults by their respective powers at be. British and European farmers are being battered by regulations and taxes, while their American counterparts are at the sharp end of rapacious green capitalism. The victim, however, is the same: the medium-sized family farmer who wants to feed the nation.
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