The imposition of Inheritance Tax on farms worth over £1 million has been one of the most controversial policies in the budget. Social media is awash with farming families reacting with dismay about how they will have to sell up. Cotswold farmer and motoring journalist, Jeremy Clarkson, said he “literally daren’t comment” at the news, and the National Farmers Union is planning a march on London for mid-November. 

British farmers do not have the same political weight that their counterparts do in France, for example; they face a tax hike that will take in around £500 million a year, though its supporters say it reduces a market distortion. In a narrow sense, it does, but the distortion could also be reduced by scrapping Inheritance Tax altogether. It is, after all, one of the most unpopular taxes nationwide, which many believe to be inherently unfair, and — according to a recent paper by the Adam Smith Institute — also encourages poor and unproductive investment decisions. 

Its expansion to farms worth £1m tells us a number of things about the attitude of our country’s new Establishment. First, that it can extract money wherever it wants; second, that it truly believes that private enterprise should be dictated to by the state. 

The British Left has long viewed agricultural relief from IHT as some kind of tax wheeze for the rich. This budget is their first opportunity to do something about that, and we shouldn’t be surprised at this decision. Farmers have never been their people. 

The threshold of £1m seems perfectly poised to harm long-standing family farms. Land prices are around £10,000 per acre and the average farm is just over 200 acres in size. This means the tax threshold is high enough that lower-productivity small farms, often semi-retirement projects or hobbies, are not covered by it, but low enough to affect huge numbers of family-owned farms, which can make a living but are unlikely to have the liquid cash available for a six-figure tax bill.

This will likely lead to far greater consolidation of the farming sector, and the end of mid-sized farms altogether. It is hard not to see this as an attack on rural culture — England’s especially. The mid-sized family farm, a genuine staple of rural life, will likely be replaced by small and unproductive hobbyist farms, reliant on subsidies, on the one hand, and corporate giants able to sustain the burdens of tax and regulation, on the other. 

One of the common arguments against this change concerns food security. While consolidation can lead to improvements in productivity — especially in large arable farms on the eastern side of England — this policy raises the risk of huge stretches of farmland being bought by investment funds and airlines for carbon offsetting, and biodiversity net-gain targets. Farmers being priced out of their own land by environmental buyers and replaced by pine forests is no fantasy, it is the stated policy of the Welsh Government, for example. These tax changes will only accelerate this as farms are hit with painful bills in the future. 

What is interesting about this Budget’s proposals is not simply that it is an attack on private property and farming families — that is a given — but what it portrays about the state’s attitude to the farming economy, and indeed the entire private sector. 

Buried in the Budget is a commitment of £5 billion taxpayers’ money “over two years to support the transition towards a more productive and environmentally sustainable agricultural sector in England and over £400 million of support for tree planting and peatland restoration.” This suggests the Government doesn’t expect farmers to farm or grow food for the country, but instead act as environmental agents of the state. 

Private enterprises will see their taxes rise, only for that money to be spent on projects and schemes for the same enterprises to do the state’s bidding. Ultimately all businesses become arms of the state. This is especially so when it comes to farmers, who are regulated to the hilt, and are bound by government order on every aspect of their business. 

… there is barely an aspect of modern farming life which isn’t dictated by the state in some way or another

From painful negotiations with local authorities over building new facilities, regulations around what products they can use to increase the yields on their crops, brutal compliance regimes with an expanding number of regulators, and government policies designed to stop farmers growing food in favour of leaving their land to run wild, there is barely an aspect of modern farming life which isn’t dictated by the state in some way or another. 

Last year, Farmers’ Weekly reported that three-quarters of farmers said the regulatory burdens were increasing, with many blaming new obligations from the Department for Agriculture, Food and Rural Affairs (DEFRA) specifically. Some airily criticise the farming sector as if it is reliant wholly on subsidy and would fail if exposed to market forces. The problem with this view is that British farms are so heavily regulated that only the largest can soak up the regulatory burden imposed on them with ease. What is true in every sector from manufacturing and technology, to hospitality or farming: regulations benefit large incumbents and stifle small and medium-sized competitors. 

It would be foolish to ignore the role the Opposition has played in this. From 2017, the Tories turned DEFRA into a regulatory powerhouse, imposing many of the most hated obligations on British farmers. These only got worse after the imposition of Net Zero in 2019 and the creation of new quangos and regulations in the 2020s. While leaving the EU’s absurd Common Agricultural Policy behind is still welcome, the replacement, the Environmental Land Management Scheme, entrenched the concept that farmers are no longer there to feed the nation, instead they should simply tend its trees and maintain its meadows.

What applies to farming applies to the rest of the economy. The merry-go-round of taxation, regulation and subsidy is a recipe for failure. This Budget highlighted the worst of this thinking, as the productive private sector is forced to bail out the dysfunctional public sector again. As Legatum wrote in its response to the Budget this week, the building blocks of prosperity are low taxes, cheap energy, and a lightly regulated economy. These building blocks do not include a punitive tax on the British countryside.