Driving around Britain in the springtime of 2016, there was an overwhelming prominence of big "Leave" signs perched on the nation's farmland, making clear the "countryside's" support for Brexit. Even at the time, with so much of the country's farm income subsidised by the EU's CAP, this seemed like "turkeys voting for Christmas". Eight 1/2 years on ... how's your Brexit going for you, farmers? "Disastrous" AU and NZ trade deals, completely new set of objectives/measures for farm subsidies, and now a new government hamstrung by low growth imposing new inheritance taxes.
Empirically estimates vary from 53-55% of farmers voting Leave. They are of course about 1% of the population. So a 100% block farmer vote, either way, would not have changed the outcome.
I voted Remain. I thought the logical basis of Leave would not survive contact with the electorate in subsequent general elections. I thought farmers were incredibly stupid if they thought the civil servants gold plating EU Directives would be any better making our regulations directly.
I don’t want sympathy, but I’d like to avoid spite.
I remember them well and to misquote Oscar Wilde “I’d need a heart of stone not to laugh.” The special pleading by some is quite astonishing bearing in mind that actually if, us usually is, it’s a couple who own a family farm the proposed inheritance tax bill doesn’t kick in until £3m is reached!
That’s the theoretical maximum relief. Widows/widowers do not have that much. Anybody who has listened to the government and put into a pension pot will see that taxed. Anybody who listened to the government and diversified into (non qualifying) businesses is not going to have that much. Leave all that aside though, you can’t eat title deeds. They’re being taxed on the working capital of their business which is fixed, not liquid. It’s like Schrödinger’s Asset.
I would like to read an interview with the owner of, say, a small family bakery or brewery and find out what their tax position would be if they want their children to inherit the business.
Indeed. Especially when you consider that pension pots are going to be taxed. For your self employed businessman/woman that’s a huge part of tax planning.
'It was the sense of entitlement that was touched, the innate narcissism of those who thought stuff only happened to lesser people, who maintained the illusion that their interests were somehow synonymous with those of the real England.'
Still so true. But now projected onto those they label as 'elite' who oppose them.
Check out Torsten Bell’s tweets. You know, director of the Resolution Foundation, parachutee into the safe urban Labour seat of Swansea West.
He points out 78% of claims are under £1.5m
But that’s of agricultural value, not open market value. Even under the old system the difference was taxable.
So the hobby farmers, the part timers, the five acres and a mansion people are not hit. That’s because the vast majority of claims are on such micro units. But this is the point - these are converted into “farms” because they’ve made a claim. In the real world they are nowhere near being “farms”. And despite having made a claim they do pay inheritance tax in their assets. He provides evidence of this in his thread.
The people in London yesterday were trying to give a simple message. Family farms, where the expertise necessary to actually produce anything is as inherited as their value, are not these micro units. Farmers have a concept of “boy’s land”. Land so easy to farm a boy could do it. Flat, fertile, easy draining. Vast swathes of the eastern part of England basically. These people couldn’t farm a fell in Cumbria, let alone the mysterious buyers who will snap up these farms in Will Hutton’s dynamic socialist utopia. We have examples in the last century of disastrous land distribution policies. You know what they are.
Of course the bottom of the pyramid has most bricks. This policy doesn’t affect them.
To be a viable farm unit you need 2-300 acres. That’s £2-4.5m. At this rate therefore farmers who also have jobs to put food in the table themselves are being taxed. The genuine family farms which Labour claim they’re not hitting (point 5 in yesterday’s infographic) are going to be hit.
The third aspect of incompetence is also in point 5. The targeting of institutional investors. I’ll let you in to a secret, they’re happy. 20% is still a good deal for them. They will happily sell a fifth of the portfolio to pay tax and not have to cry the next time they put flowers on grandpa’s grave.
The rates of duicide in farmers is huge, and don’t underestimate that generational pressure, I’m not going to be the generation who has to sell, plays in that.
So the problematic sides of the spectrum (stockbrokers buying Home Counties micro holdings as a lifestyle choice and tax dodge on one side, James Dyson type mega investors on the other) aren’t dealt with.
Yet at this rate, family farms are. Don’t believe the “most claims won’t be effected” spin because Bell has given the game away. That’s creative accounting.
Farms are a special case because the cost of capital is driven by so many external factors that don’t apply to other business assets.
So the choice for Labour is, acknowledge you’ve got this wrong and at the very least put the allowances up a million or two, or get involved in a long fight that will lose you the next election.
The current policy is incompetent in the execution of its aims. They need to realise that.
A beautifully argued response, but let me ask you how the value of land is calculated? I am presuming that if you inherit £4.5 million of land then that's roughly what you can sell it for. Otherwise it's not worth £4.5 million. The first 1.4 is untaxed, then it's 20% on the remaining £3.1. So the tax would be around 600k. Not nothing - something would have to go if you wanted to maintain that holding - but still an inheritance of £3.9 million.
The politics of this one is strange. I have no idea why you think that an election would be won of lost over this, as opposed to cost of living, the health service, etc, though it's true that inheritance tax is unpopular even among those who will never have to pay it. Btw the suicide thing is also true of dentists, though maybe I should check that.
Well take your dentist. They have a surgery. If they sell up it will be to another dentist or aligned profession. So pretty much the sale value is its business value. If a farmer sells yes other farmers are potential customers, but so are lifestylers, tree planters, solar farms, land banking developers, re-wilders. That competition all pushes the price up. So you’re being taxed not on what you can do, but on what others might want to do. In Hampshire accountants say the agricultural value of land is never more than 70% of its market value there. Closer to London it’s much less.
On the value of inheritance, £3.9m is the replacement agricultural value. In other words you don’t get that cash unless you sell. You can’t have the farm and the cash. Again compare with a dentist. Their income return to capital value off their surgery is an order of magnitude different to a farm. So it’s the income which is important to them. They will also retire at some point and never look in another mouth. The average age of farmers is above 60. They see themselves as part of a continuation which would be rare I’d say in dentists.
Family farms work very long hours at much less than minimum wage. Price pressure has pushed the farm size needed to be viable up. So taking 20% of the land out and selling it, or borrowing to pay tax, is going to cripple businesses that already don’t make much economic sense on paper.
As to the politics we have a relatively recent comparator. In 97-2007 the Tories couldn’t catch a break. New Labour were professional and serious operators most notably on the economy. They won two elections after Iraq. They had scandals and rebellions but rode them all because until George Osbourne (ironically) promised to put IHT up to a million the Tories were not credible.
I’m not saying in a Rory Stewart type way that Labour will definitely lose the next election, but if they give this as an unifying metaphor for their opponents they could lend credibility to the Tories they couldn’t buy otherwise. If people are worried about Labour being elite, too liberal and of metropolitan aspect this is playing straight into that.
On your point above about the value of land being pushed up by 'tree planters, lifestylers, etc'. A few points. Firstly there are quite strict planning rules around change of use of agricultural land (at least round here) which limit the opportunities. Secondly if planners do decide to designate farmland as development then any farmer who owns it is the lucky one so they benefit as much as anybody from that possibility. Thirdly if these other uses are both acceptable to the planners and more profitable than farming then the farmer is perfectly entitled to do the same themselves (as indeed many do). And finally if they are not (as) profitable, then how do they push up the value? Yes at the margin somebody with a nice house will pay over the odds to own the field adjacent to it for 'amenity value' but that is a marginal case. Maybe there are ecologically minded millionaires willing to pay over the odds for land to rewild at enormous cost but the beneficiary of that is the farmer who sells it to them. Once you sell the land, you've forfeited the right to any exemption from IHT n the grounds of protecting family farming businesses. I'd be happy for an exemption of farmland from IHT on the proviso that if it was sold within (say) 10 years after inheritance then the tax would be liable retrospectively.
Tree planters are buying farms in my area and have no issue with planning. In fact what’s holding them back now is the shortage of nursery grown saplings and people to plant them. This is of course funded by airlines “offsetting” their carbon emissions.
Hope value is called hope value because you dint know it will be designated, but you hope it will. If you’re not selling when you inherit you are taxed on this.
It’s the Revenue themselves that decide on the differential between agricultural value and open market value. I assure you it exists. The point is other businesses don’t have such external factors effecting the capital values of assets they’re taxed on.
"Looking in more detail at those working in skilled trade occupations, the largest elevated risk of suicide was among skilled agricultural and construction roles, similar to the findings of their lower-skilled counterparts among the elementary occupations.
Skilled trades can be subdivided into 13 minor groups. Of these, 6 have an increased risk of suicide (see Figure 3). The largest elevated risk was among building finishing trades (twice the national average). This is largely due to the high risk of suicide among plasterers, painters and decorators.
The next highest elevated risk was among agricultural and related trades (1.7 times higher). Interestingly, this group was found to have the highest proportion of deaths due to the use of a firearm (12.6% of all suicides in this group; in England this figure is 1.7%); suggesting that access to a means of suicide is an important risk factor in this group. In the past, agricultural and related trades have received much attention because farmers have been found to have an elevated risk of suicide (see Kelly and Bunting, 1998 and Meltzer et al, 2008). In the most recent data, however, the risk of suicide in farmers was not statistically different from the national average. Instead, suicide was around twice the national average among gardeners.
Similarly, a high incidence of suicide was also found among those working in construction and building trades, where the risk of suicide was 1.6 times higher than the national average. The occupation with the highest risk of suicide in this group was roofers, tilers and slaters, where the risk of suicide was 2.7 times higher than the national average. Research from Australia indicates that the elevated risk of suicide among males working in construction industries includes high levels of alcohol consumption, relationship problems and multiple stressful life events in the months before death (see Heller et al, 2007 and AISRAP, 2006)."
So it looks like you were wrong abut the farmers and I was wrong about the dentists. It's the poor bloody gardeners we should worry about.
Living as I do in a ‘rural community’ it has been striking/depressing to hear national media - not least the BBC - conflate farmers’ interests with those of ‘rural communities’ as though they are the same. They are not. We’re surrounded by farmland - some of it well-managed, some not - but of the ~400 homes in our village, 4 are farms, and approximately another ten house farm workers. Our constituency switched from Conservative to Labour this year, and that was nothing to do with farming, everything to do with public services/the lack thereof. Farmers worth more than £3million are now being asked to pay half what other rich people,, (the wealthiest 5% or so of citizens) pay - and allowed to spread it over 10 years. (Though of course if you leave your farm to your children when you’re, say, 75 - ‘about bloody time too, dad’ says 45-year-old beneficiary - and live till you’re 82, you avoid inheritance tax altogether.) Good! Somebody has to pay for public services and I think the richest 5% should pay more than others. I don’t understand why the government has been so rubbish at putting that case. As for linking this to suicide - that is lamentable gutter politics. Suicide is the number one cause of death for men under 55, and men who work largely alone, and who have the means of death easily to hand - so dentists, yes, vets, and farmers indeed - are at higher risk. Changes to tax regimes are not normally given as causes of suicidal ideation; while poverty, and inability to access health and support services, often are.
But the institutional investors would pay if they doubled or trebled the allowance. Far fewer family farms though would have to pay. So they can be right in principle, but wrong on the detail. The total denial that they are wrong in the detail isn’t going to help them grasp this.
To me, it addresses one of the fault-lines in modern liberal understanding of the world. Economically speaking, there's no doubt that inheritance tax targets only the wealthiest; that the tax is actually paid by those who inherit the wealth not those who have created it, and who therefore have no great right to it; finally, that such inheritance privileges the prospects of those who benefit against peers of equal or greater ability or industry but without the luck of having rich parents. The liberal argument for inheritance tax partakes of a Rawlsian (i.e. behind the 'veil of ignorance' about your own status or wealth) sense that it is just and fair, fairer in fact than many other forms of taxation.
But opposition to the tax is widespread, even among those who are never going to pay it. And it seems to me that this is because on such issues people do not think like Rawlsian universalists. They think rather more basically that what I have, once I have it, is mine and mine to dispose of. They are happy to pay levies on income, which is taken before they receive it and as part of a general socio-economic arrangement with employers and society, or on the purchase of goods, as they understand that the state and its laws help facilitate the safe circulation and exchange of such goods. The rules are set before they enter the game, in other words. But once something belongs to you, it should not somehow be prised away. Add into this the basic emotion of providing for one's children. Add into this also the sense that 'giving' to one's children is not like giving to a third party, it is more like a gesture of care, then it can seem grotesque that the transfer of assets within a family should be seen as if it was an open-market transaction in which government should have an interest.
I don't doubt that the debate is skewed by the influence of very rich people who are over-represented in the media and misrepresent who is being affected and how. But I also think that the high-minded justification of inheritance tax never seems as viscerally felt as opposition to it - that the objective or neutralist argument, here, seems weaker than the subjective and personal one.
This goes to the heart of the matter. People care really deeply about passing things on to their children or other family members, who in turn care really deeply about inheriting those things that have personal meaning - not 'a house', of value £x, but 'our family home', for example. People may go to extraordinary lengths of depriving themselves in life in order to have something to pass on to their children, and are fearful of inheritance tax even if there is no likelihood of their estate being valuable enough to be liable. How much more is all this true of farmers and family farms. Surely the government could find some better means of closing the tax loophole that has allowed rich people to invest in farmland to avoid paying inheritance tax.
Given the suddenness of this announcement, the least the government could do to mitigate the problem facing some family farms is to waive the 7-year rule on the transfer of assets over the next seven years, to give the owners of family farming businesses time to bring their children into ownership of part of the business without risk of death duties on these transferred assets if they die before the 7-year grace period is up.
I don't understand why Labour decided against a Wealth Tax in this budget: immensely popular with the public; affecting a small number of individuals, without significant diminution of their assets; bringing in a very significant amount of revenue, which would have allowed the government to forgo all these unpopular and contentious taxes that raise relatively small sums; and supported by many wealthy people themselves, such as the Patriotic Millionaires.
Firstly you will find many middle aged, even older, farmers who don’t own their farms, who are not paid a salary, who are labouring against the promise one day “all this will be yours” If you have a minute look up the articles on the “Cowshed Cinderella” who sued her parents when such a promise didn’t look like it would be kept. So again family farms are different. The inheritors do contribute to the wealth, or at least paper capital value.
Secondly, by way of explanation, the emotional connection with farms is great, but to understand it you have to understand the context. My wife’s family have farmed their farm for three centuries, but for most of that was as tenants. It was her grandfather who bought the freehold from the Lord. This was because he had a death duties bill to settle on the estate in the 60s. So these people literally think that they are finally getting a break, and within a generation that’s going to be taken away from them. It’s not really about giving to your children over others, it’s much more visceral than that.
We are actually discussing Rawls in our philosophy group at the moment, so the question of whether we would agree to IHT 'behind the veil of ignorance ' is interesting. Of all the things Rawls says we would be ignorant of (race, sex, place in society, etc) the fact that you might have children and want to pass on your wealth to them probably isn't one. After all it is universal. But apparently Rawls was very keen on estate taxes as an egalitarian measure.
The key point that never seems to be discussed is the absurdly high cost of farmland. If farming is so unprofitable why is land so expensive? This policy will work if it brings down the cost of land as speculators no longer see it as a good tax free investment. Then the ‘family farm’ won’t be worth so much, IHT no longer payable. Win win for the farmer - oh unless their real plan is not to pass on to the next generation but to sell up .
I think we agree about this . My point is that policy should be directed towards bringing farmland value more into line with what it is worth as agricultural capital . One driver surely of high land values is its status as an iHT shelter.
Thank you David for your cogent explanation of this contentious issue. I agree wholeheartedly with your analysis. I think this is all part of an anti Labour government pile on with claims being put forward as facts. I do wish though, that said Labour government would shout more loudly about the facts.
You've reminded me that, 20 years ago, at the time of The Observer article, I attended a course on running meetings according to Edward de Bono's principle of "The Six Thinking Hats". He had identified the 6 main characteristics of people in meetings and applied it to the way everyone discussed each item on the agenda. Anyway, in a breakout group, I along with 5 others were given the topic the proposed foxhunting ban.
Having argued it every which way according to the stated principles, I was astounded (having been very pro the ban) to discover that the conclusion we all reached - from many differing views initially - was that we didn't give a damn and wouldn't bother with any intervention, one way or the other!
Since then, I've often applied the same principle and come up with the same result. Quite extraordinary.
It’s astonishing how the arguments of 20 years ago are being repeated today on a different issue, making your serious yet amusing in parts article about fox hunting just as apposite now about Inheritance tax on farms.
Hypocrisy reigns- Dyson, Clarkson etc, who care so much about the nation, not heaven forfend, their own wealth!
It’s definitely one thing our Labour government is doing right. I have hopes that there will be more.
If someone wants to make a case against inheritance tax existing at all, ok, but shrieking that it should exist but not for your particular type of wealth, is self serving beyond belief.
(I used to be anti inheritance tax. Took the view that if you’d earned the money, up to you if you set it on fire, gave it to the cat, or to your moron offspring. Changed my mind due to the damage done in this country and the US, by very dumb men who inherited wealth and as a result, were able to cause harm with their stupidity that a regular idiot wouldn’t be able to)
If you require Jeremy Clarkson and Nigel Farage to push your cause you are lost. Im very much in favour of farming that serves to protect the nations food security. If that means taxing land speculators and helping the price of land fall a bit that might be a good thing. However the government must be careful to protect genuinely productive farms which benefit from their size.
Well either the government or the farming lobby are lying about the numbers that will be affected, but in all the news no one seems willing to say which.
Great article (well articles actually). The original article seems even wittier in retrospect, the sheer apocalyptic nonsense that was talked is breathtaking and we are still getting it from the likes of Charles Moore. Nor is it just the famers. There is a similar vein surely in the recent events surrounding Allison Pearson where a short and polite interview with two policemen about an old tweet of hers (which I confidently predict will lead absolutely nowhere and will be dropped) has triggered a full-scale Telegraph/GB News melt-down, with hysterical declarations all freedom has departed from Britain and we are in a fully-fledged Gestapo-style dictatorship. That is a sight to behold. As for the farmers, why don't the government merely exclude family farms held over a certain time, thereby catching the non farmers who have entered the game just for tax reasons?
I like this from R.S. Thomas on farmers (in his poem 'For the record'). Not sure that it iapplies to "farmers" like Jeremy Clarkson, James Dyson, and Andrew Lloyd Webber:
Driving around Britain in the springtime of 2016, there was an overwhelming prominence of big "Leave" signs perched on the nation's farmland, making clear the "countryside's" support for Brexit. Even at the time, with so much of the country's farm income subsidised by the EU's CAP, this seemed like "turkeys voting for Christmas". Eight 1/2 years on ... how's your Brexit going for you, farmers? "Disastrous" AU and NZ trade deals, completely new set of objectives/measures for farm subsidies, and now a new government hamstrung by low growth imposing new inheritance taxes.
Cry. me. a. river.
Empirically estimates vary from 53-55% of farmers voting Leave. They are of course about 1% of the population. So a 100% block farmer vote, either way, would not have changed the outcome.
I voted Remain. I thought the logical basis of Leave would not survive contact with the electorate in subsequent general elections. I thought farmers were incredibly stupid if they thought the civil servants gold plating EU Directives would be any better making our regulations directly.
I don’t want sympathy, but I’d like to avoid spite.
I remember them well and to misquote Oscar Wilde “I’d need a heart of stone not to laugh.” The special pleading by some is quite astonishing bearing in mind that actually if, us usually is, it’s a couple who own a family farm the proposed inheritance tax bill doesn’t kick in until £3m is reached!
That’s the theoretical maximum relief. Widows/widowers do not have that much. Anybody who has listened to the government and put into a pension pot will see that taxed. Anybody who listened to the government and diversified into (non qualifying) businesses is not going to have that much. Leave all that aside though, you can’t eat title deeds. They’re being taxed on the working capital of their business which is fixed, not liquid. It’s like Schrödinger’s Asset.
I would like to read an interview with the owner of, say, a small family bakery or brewery and find out what their tax position would be if they want their children to inherit the business.
Before the budget trading business were completely exempt as well. Now they are limited to £1m as well.
Its odd that this hasn't received anything like the same publicity.
Indeed. Especially when you consider that pension pots are going to be taxed. For your self employed businessman/woman that’s a huge part of tax planning.
'It was the sense of entitlement that was touched, the innate narcissism of those who thought stuff only happened to lesser people, who maintained the illusion that their interests were somehow synonymous with those of the real England.'
Still so true. But now projected onto those they label as 'elite' who oppose them.
Check out Torsten Bell’s tweets. You know, director of the Resolution Foundation, parachutee into the safe urban Labour seat of Swansea West.
He points out 78% of claims are under £1.5m
But that’s of agricultural value, not open market value. Even under the old system the difference was taxable.
So the hobby farmers, the part timers, the five acres and a mansion people are not hit. That’s because the vast majority of claims are on such micro units. But this is the point - these are converted into “farms” because they’ve made a claim. In the real world they are nowhere near being “farms”. And despite having made a claim they do pay inheritance tax in their assets. He provides evidence of this in his thread.
The people in London yesterday were trying to give a simple message. Family farms, where the expertise necessary to actually produce anything is as inherited as their value, are not these micro units. Farmers have a concept of “boy’s land”. Land so easy to farm a boy could do it. Flat, fertile, easy draining. Vast swathes of the eastern part of England basically. These people couldn’t farm a fell in Cumbria, let alone the mysterious buyers who will snap up these farms in Will Hutton’s dynamic socialist utopia. We have examples in the last century of disastrous land distribution policies. You know what they are.
Of course the bottom of the pyramid has most bricks. This policy doesn’t affect them.
To be a viable farm unit you need 2-300 acres. That’s £2-4.5m. At this rate therefore farmers who also have jobs to put food in the table themselves are being taxed. The genuine family farms which Labour claim they’re not hitting (point 5 in yesterday’s infographic) are going to be hit.
The third aspect of incompetence is also in point 5. The targeting of institutional investors. I’ll let you in to a secret, they’re happy. 20% is still a good deal for them. They will happily sell a fifth of the portfolio to pay tax and not have to cry the next time they put flowers on grandpa’s grave.
The rates of duicide in farmers is huge, and don’t underestimate that generational pressure, I’m not going to be the generation who has to sell, plays in that.
So the problematic sides of the spectrum (stockbrokers buying Home Counties micro holdings as a lifestyle choice and tax dodge on one side, James Dyson type mega investors on the other) aren’t dealt with.
Yet at this rate, family farms are. Don’t believe the “most claims won’t be effected” spin because Bell has given the game away. That’s creative accounting.
Farms are a special case because the cost of capital is driven by so many external factors that don’t apply to other business assets.
So the choice for Labour is, acknowledge you’ve got this wrong and at the very least put the allowances up a million or two, or get involved in a long fight that will lose you the next election.
The current policy is incompetent in the execution of its aims. They need to realise that.
A beautifully argued response, but let me ask you how the value of land is calculated? I am presuming that if you inherit £4.5 million of land then that's roughly what you can sell it for. Otherwise it's not worth £4.5 million. The first 1.4 is untaxed, then it's 20% on the remaining £3.1. So the tax would be around 600k. Not nothing - something would have to go if you wanted to maintain that holding - but still an inheritance of £3.9 million.
The politics of this one is strange. I have no idea why you think that an election would be won of lost over this, as opposed to cost of living, the health service, etc, though it's true that inheritance tax is unpopular even among those who will never have to pay it. Btw the suicide thing is also true of dentists, though maybe I should check that.
Well take your dentist. They have a surgery. If they sell up it will be to another dentist or aligned profession. So pretty much the sale value is its business value. If a farmer sells yes other farmers are potential customers, but so are lifestylers, tree planters, solar farms, land banking developers, re-wilders. That competition all pushes the price up. So you’re being taxed not on what you can do, but on what others might want to do. In Hampshire accountants say the agricultural value of land is never more than 70% of its market value there. Closer to London it’s much less.
On the value of inheritance, £3.9m is the replacement agricultural value. In other words you don’t get that cash unless you sell. You can’t have the farm and the cash. Again compare with a dentist. Their income return to capital value off their surgery is an order of magnitude different to a farm. So it’s the income which is important to them. They will also retire at some point and never look in another mouth. The average age of farmers is above 60. They see themselves as part of a continuation which would be rare I’d say in dentists.
Family farms work very long hours at much less than minimum wage. Price pressure has pushed the farm size needed to be viable up. So taking 20% of the land out and selling it, or borrowing to pay tax, is going to cripple businesses that already don’t make much economic sense on paper.
As to the politics we have a relatively recent comparator. In 97-2007 the Tories couldn’t catch a break. New Labour were professional and serious operators most notably on the economy. They won two elections after Iraq. They had scandals and rebellions but rode them all because until George Osbourne (ironically) promised to put IHT up to a million the Tories were not credible.
I’m not saying in a Rory Stewart type way that Labour will definitely lose the next election, but if they give this as an unifying metaphor for their opponents they could lend credibility to the Tories they couldn’t buy otherwise. If people are worried about Labour being elite, too liberal and of metropolitan aspect this is playing straight into that.
On your point above about the value of land being pushed up by 'tree planters, lifestylers, etc'. A few points. Firstly there are quite strict planning rules around change of use of agricultural land (at least round here) which limit the opportunities. Secondly if planners do decide to designate farmland as development then any farmer who owns it is the lucky one so they benefit as much as anybody from that possibility. Thirdly if these other uses are both acceptable to the planners and more profitable than farming then the farmer is perfectly entitled to do the same themselves (as indeed many do). And finally if they are not (as) profitable, then how do they push up the value? Yes at the margin somebody with a nice house will pay over the odds to own the field adjacent to it for 'amenity value' but that is a marginal case. Maybe there are ecologically minded millionaires willing to pay over the odds for land to rewild at enormous cost but the beneficiary of that is the farmer who sells it to them. Once you sell the land, you've forfeited the right to any exemption from IHT n the grounds of protecting family farming businesses. I'd be happy for an exemption of farmland from IHT on the proviso that if it was sold within (say) 10 years after inheritance then the tax would be liable retrospectively.
Tree planters are buying farms in my area and have no issue with planning. In fact what’s holding them back now is the shortage of nursery grown saplings and people to plant them. This is of course funded by airlines “offsetting” their carbon emissions.
Hope value is called hope value because you dint know it will be designated, but you hope it will. If you’re not selling when you inherit you are taxed on this.
It’s the Revenue themselves that decide on the differential between agricultural value and open market value. I assure you it exists. The point is other businesses don’t have such external factors effecting the capital values of assets they’re taxed on.
Being the kind of animal I am and being extremely sceptical when straight line motives are suggested for suicide, I looked up the stats. https://www.ons.gov.uk/peoplepopulationandcommunity/birthsdeathsandmarriages/deaths/articles/suicidebyoccupation/england2011to2015 has the figures.
The ONS study concludes:
"Looking in more detail at those working in skilled trade occupations, the largest elevated risk of suicide was among skilled agricultural and construction roles, similar to the findings of their lower-skilled counterparts among the elementary occupations.
Skilled trades can be subdivided into 13 minor groups. Of these, 6 have an increased risk of suicide (see Figure 3). The largest elevated risk was among building finishing trades (twice the national average). This is largely due to the high risk of suicide among plasterers, painters and decorators.
The next highest elevated risk was among agricultural and related trades (1.7 times higher). Interestingly, this group was found to have the highest proportion of deaths due to the use of a firearm (12.6% of all suicides in this group; in England this figure is 1.7%); suggesting that access to a means of suicide is an important risk factor in this group. In the past, agricultural and related trades have received much attention because farmers have been found to have an elevated risk of suicide (see Kelly and Bunting, 1998 and Meltzer et al, 2008). In the most recent data, however, the risk of suicide in farmers was not statistically different from the national average. Instead, suicide was around twice the national average among gardeners.
Similarly, a high incidence of suicide was also found among those working in construction and building trades, where the risk of suicide was 1.6 times higher than the national average. The occupation with the highest risk of suicide in this group was roofers, tilers and slaters, where the risk of suicide was 2.7 times higher than the national average. Research from Australia indicates that the elevated risk of suicide among males working in construction industries includes high levels of alcohol consumption, relationship problems and multiple stressful life events in the months before death (see Heller et al, 2007 and AISRAP, 2006)."
So it looks like you were wrong abut the farmers and I was wrong about the dentists. It's the poor bloody gardeners we should worry about.
Living as I do in a ‘rural community’ it has been striking/depressing to hear national media - not least the BBC - conflate farmers’ interests with those of ‘rural communities’ as though they are the same. They are not. We’re surrounded by farmland - some of it well-managed, some not - but of the ~400 homes in our village, 4 are farms, and approximately another ten house farm workers. Our constituency switched from Conservative to Labour this year, and that was nothing to do with farming, everything to do with public services/the lack thereof. Farmers worth more than £3million are now being asked to pay half what other rich people,, (the wealthiest 5% or so of citizens) pay - and allowed to spread it over 10 years. (Though of course if you leave your farm to your children when you’re, say, 75 - ‘about bloody time too, dad’ says 45-year-old beneficiary - and live till you’re 82, you avoid inheritance tax altogether.) Good! Somebody has to pay for public services and I think the richest 5% should pay more than others. I don’t understand why the government has been so rubbish at putting that case. As for linking this to suicide - that is lamentable gutter politics. Suicide is the number one cause of death for men under 55, and men who work largely alone, and who have the means of death easily to hand - so dentists, yes, vets, and farmers indeed - are at higher risk. Changes to tax regimes are not normally given as causes of suicidal ideation; while poverty, and inability to access health and support services, often are.
But the institutional investors would pay if they doubled or trebled the allowance. Far fewer family farms though would have to pay. So they can be right in principle, but wrong on the detail. The total denial that they are wrong in the detail isn’t going to help them grasp this.
The politics of inheritance tax is fascinating.
To me, it addresses one of the fault-lines in modern liberal understanding of the world. Economically speaking, there's no doubt that inheritance tax targets only the wealthiest; that the tax is actually paid by those who inherit the wealth not those who have created it, and who therefore have no great right to it; finally, that such inheritance privileges the prospects of those who benefit against peers of equal or greater ability or industry but without the luck of having rich parents. The liberal argument for inheritance tax partakes of a Rawlsian (i.e. behind the 'veil of ignorance' about your own status or wealth) sense that it is just and fair, fairer in fact than many other forms of taxation.
But opposition to the tax is widespread, even among those who are never going to pay it. And it seems to me that this is because on such issues people do not think like Rawlsian universalists. They think rather more basically that what I have, once I have it, is mine and mine to dispose of. They are happy to pay levies on income, which is taken before they receive it and as part of a general socio-economic arrangement with employers and society, or on the purchase of goods, as they understand that the state and its laws help facilitate the safe circulation and exchange of such goods. The rules are set before they enter the game, in other words. But once something belongs to you, it should not somehow be prised away. Add into this the basic emotion of providing for one's children. Add into this also the sense that 'giving' to one's children is not like giving to a third party, it is more like a gesture of care, then it can seem grotesque that the transfer of assets within a family should be seen as if it was an open-market transaction in which government should have an interest.
I don't doubt that the debate is skewed by the influence of very rich people who are over-represented in the media and misrepresent who is being affected and how. But I also think that the high-minded justification of inheritance tax never seems as viscerally felt as opposition to it - that the objective or neutralist argument, here, seems weaker than the subjective and personal one.
This goes to the heart of the matter. People care really deeply about passing things on to their children or other family members, who in turn care really deeply about inheriting those things that have personal meaning - not 'a house', of value £x, but 'our family home', for example. People may go to extraordinary lengths of depriving themselves in life in order to have something to pass on to their children, and are fearful of inheritance tax even if there is no likelihood of their estate being valuable enough to be liable. How much more is all this true of farmers and family farms. Surely the government could find some better means of closing the tax loophole that has allowed rich people to invest in farmland to avoid paying inheritance tax.
Given the suddenness of this announcement, the least the government could do to mitigate the problem facing some family farms is to waive the 7-year rule on the transfer of assets over the next seven years, to give the owners of family farming businesses time to bring their children into ownership of part of the business without risk of death duties on these transferred assets if they die before the 7-year grace period is up.
I don't understand why Labour decided against a Wealth Tax in this budget: immensely popular with the public; affecting a small number of individuals, without significant diminution of their assets; bringing in a very significant amount of revenue, which would have allowed the government to forgo all these unpopular and contentious taxes that raise relatively small sums; and supported by many wealthy people themselves, such as the Patriotic Millionaires.
Two points on that.
Firstly you will find many middle aged, even older, farmers who don’t own their farms, who are not paid a salary, who are labouring against the promise one day “all this will be yours” If you have a minute look up the articles on the “Cowshed Cinderella” who sued her parents when such a promise didn’t look like it would be kept. So again family farms are different. The inheritors do contribute to the wealth, or at least paper capital value.
Secondly, by way of explanation, the emotional connection with farms is great, but to understand it you have to understand the context. My wife’s family have farmed their farm for three centuries, but for most of that was as tenants. It was her grandfather who bought the freehold from the Lord. This was because he had a death duties bill to settle on the estate in the 60s. So these people literally think that they are finally getting a break, and within a generation that’s going to be taken away from them. It’s not really about giving to your children over others, it’s much more visceral than that.
We are actually discussing Rawls in our philosophy group at the moment, so the question of whether we would agree to IHT 'behind the veil of ignorance ' is interesting. Of all the things Rawls says we would be ignorant of (race, sex, place in society, etc) the fact that you might have children and want to pass on your wealth to them probably isn't one. After all it is universal. But apparently Rawls was very keen on estate taxes as an egalitarian measure.
The key point that never seems to be discussed is the absurdly high cost of farmland. If farming is so unprofitable why is land so expensive? This policy will work if it brings down the cost of land as speculators no longer see it as a good tax free investment. Then the ‘family farm’ won’t be worth so much, IHT no longer payable. Win win for the farmer - oh unless their real plan is not to pass on to the next generation but to sell up .
Because it’s not only farmers buying it.
I think we agree about this . My point is that policy should be directed towards bringing farmland value more into line with what it is worth as agricultural capital . One driver surely of high land values is its status as an iHT shelter.
Thank you David for your cogent explanation of this contentious issue. I agree wholeheartedly with your analysis. I think this is all part of an anti Labour government pile on with claims being put forward as facts. I do wish though, that said Labour government would shout more loudly about the facts.
You've reminded me that, 20 years ago, at the time of The Observer article, I attended a course on running meetings according to Edward de Bono's principle of "The Six Thinking Hats". He had identified the 6 main characteristics of people in meetings and applied it to the way everyone discussed each item on the agenda. Anyway, in a breakout group, I along with 5 others were given the topic the proposed foxhunting ban.
Having argued it every which way according to the stated principles, I was astounded (having been very pro the ban) to discover that the conclusion we all reached - from many differing views initially - was that we didn't give a damn and wouldn't bother with any intervention, one way or the other!
Since then, I've often applied the same principle and come up with the same result. Quite extraordinary.
It’s astonishing how the arguments of 20 years ago are being repeated today on a different issue, making your serious yet amusing in parts article about fox hunting just as apposite now about Inheritance tax on farms.
Hypocrisy reigns- Dyson, Clarkson etc, who care so much about the nation, not heaven forfend, their own wealth!
It’s definitely one thing our Labour government is doing right. I have hopes that there will be more.
Couldn’t agree more.
If someone wants to make a case against inheritance tax existing at all, ok, but shrieking that it should exist but not for your particular type of wealth, is self serving beyond belief.
(I used to be anti inheritance tax. Took the view that if you’d earned the money, up to you if you set it on fire, gave it to the cat, or to your moron offspring. Changed my mind due to the damage done in this country and the US, by very dumb men who inherited wealth and as a result, were able to cause harm with their stupidity that a regular idiot wouldn’t be able to)
I wouldn’t argue IHT should not exist. I wouldn’t even argue the APR regime didn’t need reform. The argument have is that they’ve set it up all wrong.
If you require Jeremy Clarkson and Nigel Farage to push your cause you are lost. Im very much in favour of farming that serves to protect the nations food security. If that means taxing land speculators and helping the price of land fall a bit that might be a good thing. However the government must be careful to protect genuinely productive farms which benefit from their size.
How is this going to lead to a fall in land prices?
Drop in speculative buyers seeking tax breaks reducing the heat on the demand side? Put me right sir!
Excellent thank you
Well either the government or the farming lobby are lying about the numbers that will be affected, but in all the news no one seems willing to say which.
Great article (well articles actually). The original article seems even wittier in retrospect, the sheer apocalyptic nonsense that was talked is breathtaking and we are still getting it from the likes of Charles Moore. Nor is it just the famers. There is a similar vein surely in the recent events surrounding Allison Pearson where a short and polite interview with two policemen about an old tweet of hers (which I confidently predict will lead absolutely nowhere and will be dropped) has triggered a full-scale Telegraph/GB News melt-down, with hysterical declarations all freedom has departed from Britain and we are in a fully-fledged Gestapo-style dictatorship. That is a sight to behold. As for the farmers, why don't the government merely exclude family farms held over a certain time, thereby catching the non farmers who have entered the game just for tax reasons?
I like this from R.S. Thomas on farmers (in his poem 'For the record'). Not sure that it iapplies to "farmers" like Jeremy Clarkson, James Dyson, and Andrew Lloyd Webber:
You were on the old side of life,
Helping it in through the dark door
Of earth and beast, quietly repairing
The rents of history with your hands.