Comments on the proposals for Inheritance tax in the Budget, October 2024

We can’t ignore the huge coverage farming has been getting in the media recently. Sadly much of the focus on inheritance tax is I believe a red herring, and far more important issues are being masked by it. I am a huge supporter of the NFU but on this occasion I believe the “Stop the family farm tax” approach is a mistake, and worse still they risk being led on by people and organisations who should only be dined with using a very long spoon.

I am concerned that protests such as the ones in London risk farmers’ previously very high approval rating with the public, second only to nurses. It is essential that MPs need to be lobbied in order to make sure they understand the likely consequences of the budget proposals, and we continue to do so, such as at a meeting Dorset NFU officers had with Lloyd Hatton, new MP for south Dorset, who gave us a very fair hearing across this and the many other issues which have profound consequences for food production in the UK. Unfortunately he is not working in the Treasury or No 10.

The NFU and farming as a whole might better be focused on the following:

1. The very sudden slashing by the government of the remaining 3 years of the Basic Payment Scheme (BPS).  When the original tapered reduction was first imposed following Brexit, farmers were promised that the new Environmental Land Management Schemes (ELMS) would go a long way to replace the loss of BPS, formerly a payment to enable us to produce food below the cost of production.  ELMS would reward us instead with public money for public goods, such as environmental work.  The programme has been very slow to develop, and recently we have even seen parts of it being “paused”.  We face a yawning gap.  Scottish, Welsh and EU farmers continue to receive full BPS cash.  How are English farmers supposed to compete?
2. The unlevel playing field we have to operate on.  The last government signed very generous trade deals with Australia and New Zealand which gave away huge advantages to those who wish to compete in our markets for food, yet the food they produce uses methods and inputs that were long ago banned in the UK.  This is simply a continuation of sickeningly familiar policies which have ever more tightly hobbled UK farmers for years, compared to those who export food into the UK.  2 examples: a) Tighter and tighter regulation of the pig industry over recent decades has steadily driven more and more UK pig farmers out of production, while supermarkets shamelessly continue to import cheaper cuts from abroad produced in ways not allowed here.  b) The ban on neonicotinoid insecticides 10 years ago has reduced our rapeseed production from a self sufficient 2 million tons per year, to around 700,000 tons this year, so we are having to import 1.3 million tons to meet demand.  Where is this coming from?  Countries like Canada, Australia and Ukraine, where no such ban exists and no-one cares that the “bee killing pesticide” is used.  We are importing this stuff, and exporting our environmental responsibility.  Where is any moral lead on this?
3. The pressures on land from numerous directions:  From the purchase of land for inheritance tax (IHT) avoidance, house and road building, business and shopping parks, wind farms, solar parks, pony paddocks, fancy gardens, and most recently modern scourges such as Nutrient Neutrality (see my previous coverage of this here), There are also other pollution offsetting schemes and water company shenanigans, net zero, biodiversity net gain, rewilding etc, all placing greater demands on land.  For this reason it is very unlikely we will see a fall in the price of land, and where land is still farmed for food, it has to be farmed ever harder to make the sums add up.  This has huge consequences for the environment, wildlife, soil and water quality, and is likely to result in the production of poorer quality food.
4. The promised Carbon Border Adjustment, which will add a tax to imported products deemed high in associated carbon emissions.  Eg: artificial fertiliser.  Like it or not fertiliser is a very cost effective way of producing more food from the same area.  The government has decided to impose this tax, which is estimated will add around £50 per ton of fertiliser.  This will obviously increase our cost of production, and the very likely outcome will be similar to the above. Foreign producers of foods grown with untaxed fertiliser (most foods are grown with fertliser) will yet again have an advantage over our home growers.  Same old story.

The Budget in brief:

The government’s budget announced on October 30^th, amongst many other things, contained a number of items that will have a considerable effect on landowners, owners of family businesses, and farmers across the UK. The sad thing is, the proposals in the budget that I cover here will not begin to raise the sums required to solve the country’s problems. The items that will affect farmers include the following:

1. Reduction of business property relief (BPR) previously a 100% exemption of business assets liable to inheritance tax (IHT) held by an individual wishing to leave such assets to their successors on death.  Now reduced to 50% relief after full exemption for the first £1 million.
2. Agricultural property relief (APR), previously a 100% exemption from IHT for land passed to the next generation, now seeing a reduction in the same way as BPR, to 50% of the value of land held by an individual wishing to pass it on, with exemption for the first £1 million. APR and BPR together limited to £1m exemption.
3. Changes to pension treatment such that any unused pension on death which previously could be passed on outside of tax, will now be subject to IHT.
4. Changes to national insurance which will raise the cost of employment particularly for businesses with larger workforces.
5. Drastic shortening of the tailing off of the Basic Payment scheme (BPS), as mentioned at the top, and a pause to the processing and paying out of claims for capital works, which covers anything from tree planting, hedging and fencing, to slurry stores, silage clamps and dry stone walls, all of which are being funded under an increasingly complicated suite of schemes under the environmental land management schemes banner (ELMS). There are now rumours of worse cuts to come. Is it any wonder farmers have been getting agitated?

What are the changes to IHT supposed to achieve?

• The proposed IHT changes relating to land, coming from a Labour government, one might have imagined would be aimed mainly at the ultra-wealthy, who have steadily driven up the price of farmland, as they have for decades sunk their wealth in a hitherto tax-free environment in relation to IHT. Sad to say the proposals as they stand comprehensively fail to address this. Farmland will still sit in an effective 20% band, far friendlier to wealth preservation than full fat IHT at the 40% which apply to any other kind of assets. Perhaps worthwhile to note here that BPR was first brought in in 1973, APR in 1984, at 50% exemption, and finally moved to 100% under John Major in 1993, since when the increase in the value of land has greatly outstripped most other investments
• The rising value of land has wide repercussions across the whole of food production, ever higher prices achieved at land sales have driven rents ever upwards, landowners and their agents expect the rent, or returns from farming, to somehow reflect the value of the land.  Claims that the proposed changes will reduce the price of land are for the birds.
• The £1 million exemption is set so low that it will draw far more relatively small farming and other types of businesses into IHT than it needs to, hence the huge reaction from so many farmers. Many farms, especially smaller ones, function on very tight margins, a huge number of which don’t begin to provide a return to match the theoretical value of the land, which has inflated over the decades completely out of the control of its owners, due to the pressures related above in paragraph 3
• The proposed changes send a confusing message to business owners, they make absolutely no sense up against Labour’s endless proclamations of growth growth growth for one moment.  You won’t get growth if you de-incentivise the entrepreneurial and risk-taking sector in such a way.  Who would start up a new business in such a climate?

Some will celebrate the proposals; why should the children of those fortunate enough to own hugely valuable assets like land be able to inherit them tax free ? I would ask them to look a little closer and ask who would they want to be responsible for producing their food; a larger number of highly motivated individual family run businesses, or a tiny number of huge (probably corporate) landowners, who would be the only ones who could possibly afford to buy land in the future?

Many business owners will for the first time face IHT at scale with the loss of much of Business Property Relief, and broadening the campaign would draw so many more family business owners in, we should be working with family businesses across all industries, not just our own. We need to tread with care though, a modest tweaking of the exemption thresholds, to say £5 million, and a fairer treatment of say the over 75s to give time to sort their affairs, would take the wind out of the APR protests, but all the other problems would still remain.  Hence the urgent need to adjust the focus of the argument sooner rather than later.

Let’s be honest, anything can happen, and none of us know what the result will be.  Haven’t we seen that play out rather well since that infamous vote in 2016? Maybe we can reassure ourselves that there may at least be a little bit of new of money available to invest in our threadbare country.  Whether a government like this is capable of using that money wisely is, I admit, another question entirely.  

Many farmers have been heavily invested in environment schemes for decades.  With the faster removal of BPS, and other signals, we now fear that it will be impossible to sufficiently make up what we lose through BPS with ELM schemes.  For many farmers, the only option will be to drive the land ever harder, risking driving a coach and horses through the government’s claimed environmental ambitions. We have seen absolutely no hint that the government has any well thought out plan for the future of food production and security, or how to service their commitments to the environment. Cumbrian shepherd and author James Rebanks has written very intelligently here about the current mood, he is even more gloomy than I, believing that the progressive greener dream for UK farming has died.

James has become an icon for the environmentally inclined farmer, with his eloquent writing and broadcasting, but being a hill farmer really is at the sharp end of the massive betrayal that is underway. There are far fewer options for hill farmers to engage with any of the ELM schemes in order to try to compensate for the loss of BPS, than there are for lowland farmers.

For more of James’ output, a more recent article, on the future of UK food production can be found here: https://unherd.com/2024/12/a-food-apocalypse-is-coming/. For a much longer read see his books The Shepherds Life, and English Pastoral.

While we are on the links, here is one more interesting piece, by a tax specialist, who has given more thought than many to the IHT issues, and his arguments about how many people will be badly affected by the proposals are well worth exploring. https://taxpolicy.org.uk/2024/11/24/how-to-stop-iht-avoidance-but-protect-farmers/

OK can we see a way through this?

Government

Solution 1: If farmers were allowed to operate on a fairer playing field we could all be increasing production, employing more people, paying more income tax and national insurance, trading locally and internationally, stimulating the rural economy, and becoming less reliant on public money.  

Solution 2: A more effective way in which the government could use APR reliefs would be to use them to persuade more landowners to let out more land, and on longer terms.  There is a dire shortage of land available to rent. For example 100% relief for minimum 20 year lets, 50% for 10 years etc.  Sadly so far the NFU and the TFA (tenant farmers association) have failed to persuade Ms Reeves of the value of even this.  

Solution 3: Tweak the exemption levels, and convince us you are only going after the ultra wealthy.  You know darn well the amounts you will raise from smaller landowners will be tiny. 

NFU

Priority 1: Find a new slogan and approach to clearly embrace all the issues facing us, not just APR.

Priority 2: Hammer on the doors of the Treasury until the chancellor agrees to meet and get her to explain to us what she is trying to achieve and why she thinks any of her ideas will work. (She has to date refused to meet the NFU).

Priority 3: Remain positive, tell the whole story over and over and over, with passion, eloquence and authority.

Back to Nov-Dec 2024

The View From the Hill

Confession – new drone, couldn’t find old one lost in forest.

Here we see the Stour valley accommodating the excessive autumn rainfall for a third time already this season, this view just east of Durweston, with Manor France farm left of centre, and Blandford in the distance.  This flood resulted from the combined effect of 95mm of rain in the previous 48 hours, on top of the melting 3 inches of snow that had fallen two days earlier.

This had followed a lovely dry period mid November, a welcome respite from the relentless downfalls of the previous two months.  The drier period had allowed us to return our animals to the meadows, there being plenty of grass still left to eat before winter.  The 91 year old early warning system lit up on the Saturday morning, so Fred and Rosie moved the cattle up onto higher ground behind Knighton House, and Jayne and I rounded up our lambs that have been free ranging the meadows for many weeks.  We then sat and watched with Father as the water rose before our eyes, over the next two hours the land across which we had just walked the lambs became completely submerged.  A bit close for comfort, the animals can’t be trusted not to get themselves marooned on the last bit of dry land, and sheep in particular will not voluntarily put a foot in the water. Sheep floating downstream into Blandford not a good outcome.

A pic from July 2012 shows that if they can be persuaded, cattle will give a good show of actually enjoying it, admittedly the water was a lot warmer on that occasion.

Please note the oak tree with sunshine on it in the middle of the arable field below the water in the top picture, when Storm Darragh blew through a few couple of weeks ago, it caused plenty of trouble. 

We were in Devon at the time, and were disturbed late Saturday night by the noise of roofing sheets being ripped off a cattle shed near the house. The cattle seemed remarkably calm when we checked them, and pulled the broken sheets out of their bedding.
On our return home, we were hugely saddened to find that the old oak tree between Durweston and Bryanston in the Park field, that has been leaning perilously since it lost a massive limb several years ago, had finally succumbed to gravity, and now lies sprawled and desolate.  Its root ball is huge, and the hole left by it surprisingly deep.

At last, an opportunity arose to use our still shiny concrete mixer for the job it was really intended for by the manufacturer.  Regular readers may recall our seed mixing habit, which doesn’t trouble the interior paintwork, whereas the first mix of concrete was likely to have a yellow hue.  The project here is to prevent damp finding its way into our new classroom, the exterior soil level having been higher than the floor inside, we decided to create an open dry drain, which required the creation of a footing and a block retaining wall.  Drew is once again the skilled fellow doing all the clever bits. His cast in-situ kerb is a masterpiece.

Our cluster group was treated to a ‘Beaver special’ a few weeks ago, Neve Bray from Dorset FWAG (farming and wildlife advisory group) took us through the history of beaver persecution followed by extinction in the UK some 400 years ago, and then moved on to explain what beavers can bring to a river catchment.  Beaver fans claim they can slow down the passage of water through a catchment by creating leaky dams and wetland areas, whereas the less convinced fear they will destroy valuable trees and cause unpredictable flooding of settlements and productive land.  Both would be correct, the skilled bit is in deciding where their work could be beneficial, and steer them towards it, as well as to possess the (legal and practical) ability to prevent them doing the wrong thing in the wrong place.  The Dorset Stour enters the sea at Christchurch harbour, after meandering through many miles of built up area.  It has a huge catchment running up to Wincanton and Stourhead in the north, and close to Sherborne in the west. With such a huge catchment it does not need very many hours of heavy rain to build a flood risk.

On a river like the Dorset Stour, where the principle passage of the river was deepened and widened by dredging in the past, and had many mills and weirs built, the main body is so far removed from a naturally functioning river habitat, that no amount of beaver work is likely be of much use, whereas some of its tributaries, which still retain their naturally formed dimensions, might be usefully modified by beaver work to slow down the movement of water during extreme rainfall events, by holding it up and only slowly releasing it into the river over a period of time which would lessen the risk of flooding further downstream.  This is immediately a worry for farmers of the land alongside the tributaries, they fear their land will spend more time under water, damaging pasture or crops, or permanently reducing the productivity of the soil.  However it should not be too difficult for government to devise a scheme that would reward land owners for allowing this, likely to be considerably cheaper than building massive flood barriers in the built up areas.

But how do you prevent the beavers working where they are not wanted?  They must be able to be controlled if they wander off and threaten areas where they may do significant damage.  Legislation that accompanied their re-introduction, surprisingly rapidly, made them a protected species, so they cannot be touched and their dams cannot be removed without official approval.

Beavers can be legally introduced to an area deemed improvable, under licence.  What is making life complicated in some areas is where beavers are being introduced without licence, or surprise surprise, they migrate to areas beyond their original release, and this very quickly causes conflict between the bealievers who enabled the release, and those who see them simply as vermin.  Not helpful, and very unlikely to help with flood control or wetland development (which in the right areas is good for birds and other species), it will cause conflict, and prolong the pain suffered by people who endure the consequences of flooding, with little hope for improvement.

Sitting in on a meeting of the Stour Delivery group a few weeks ago, we were given a detailed and polished presentation on the issues of flooding in the lower Stour, from Wimborne and onwards towards Christchurch.  A great deal of effort has been expended by the Environment agency in creating a detailed report on flood risk, focussing on a strategy for reducing risk of flooding to households and other property.  The strategy looks at first glance well-meaning, see below:

But frankly it’s a load of bureaucratic waffle and fails to address the real problem. It is worth noting that the most vulnerable areas are those populated by Park homes (mobile homes), which have been shoehorned into areas deemed unsuitable for building due to flood risk.  Should we be surprised that there is still a problem, these sites still flood!  The water doesn’t care whether it is concrete and brick, or mobile homes.

The reason for reporting on this is to point out that nowhere in the report is serious attention given to attending to the quantity of water entering the lower section of the river from higher up in the catchment, following periods of heavy rain.  When the question asked was “Where does most of the flooding risk come from; the excessive amount of built up area in the floodplain, or water arriving from higher in the catchment?” the answer was clear, it was the latter.  Yet the report continues to discuss at great length how to reduce flood risk with construction of earth banks, concrete walls etc, and perhaps moving some of the Park homes, and doesn’t begin to address the issue in a whole catchment sense at all. 

The sense of frustration was acute, the sound of balls being kicked down the road was deafening.  Some of the answers are there for the taking, but no-one seems to want to try.

Our oldest cow, Freda, also known as 2244, her tag number, is 16 years old, a fine age for a cow, she has borne us 14 calves in that time, worth many 000’s in sales and food put on the table.  She is the last of our original calves bought from our cousin Will when Dougal started up the suckler beef herd. We have several of her daughters in the herd today, and this year’s calf being a heifer and a pretty colour will also be kept for breeding, continuing the line.

If you are eating breakfast you might want to take a break for a few moments before proceeding…..

A couple of weeks ago our local friendly vet came to examine our cows to see how many are in calf, and to give us a rough idea in what order they will produce. Sheep are quite easy to scan for the presence of lambs, through a handy wool-free zone just in front of the udder, they can be examined with a hand held scanner connected to a screen, on a raised platform in a race.  An experienced scanner can tell you how many lambs are present within 10-15 seconds.  With cows it is an altogether different task, involving a long glove, a considerable amount of effort, a great deal of manure, and a small hand held scanner connected to a tiny screen embedded in a pair of special glasses.  The approximate date of birth can be obtained by matching the size of the embryo to a scale on the screen. These pictures are from the archive, before the days of the electronic headset. Andrew has now given up this joyous pastime. The very sad news is that Freda is not in calf.

The cattle are grazing cover crop, here shown on the Knoll, they are always ready to move when someone comes to let them into the new strip next day, and immediately put their heads down and start on the fresh foliage in front of them.

Here are our sheep grazing on a newly established herbal ley (grass and herbs), this was undersown last spring, into a crop of spring barley, the barley was cleared at harvest, and bingo, there is the ley growing amongst the stubble. The cows grazed it briefly back in October, and now the sheep are nibbling it down to remove annual weeds and encourage thickening up. This should mean it will be ready for the cows to return earlier in the spring than if we had sown it after harvest, in August.
The more observant reader will by now have noticed clues pointing to the occurrence of fertile behaviour in this field. The yellow raddle mark on the rear of the ewe on the right tells us that young Ronnie, our new ram, has been at work. Ronnie can be seen in the left hand picture, standing next to our rather tall wether, Little Bear. Laughter erupted amongst the farm team when they first spotted Ronnie, jokes about step ladders and telephone directories proliferated, and father was even heard to ask why one of the ewes had been left behind with its lamb in the farm paddock, when the rest had been moved to better grass. Ronnie was being rested with Little Bear for a few days before being put to work. Well the doubters can rest assured that Ronnie, in spite of his Corbett-like stature, has performed as well as we could have hoped. All the ewes have been covered, and none have returned for a second service in the 12 days since the first complete 17 day cycle. Lambing with luck will begin around the 1st of May.

Some readers might have been expecting a few words on the very current issues around the government’s recent budget proposals regarding changes to inheritance tax, and agricultural and business property reliefs in particular. Please follow this link to a separate page on this issue, if it is up your particular street.

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