Dave Reid, Socialist Party National Committee

Thousands of farmers have been protesting at the changes to inheritance tax laws contained in Labour chancellor Rachel Reeves’s Budget.

The changes mean that the exemption from paying inheritance tax on agricultural land valued at over £1.5 million is removed, and farms worth over that amount will be liable for 20% inheritance tax when the owners die.

Many workers struggling to pay bills in the cost-of-living crisis and facing the continuation of public spending cuts under this government would be forgiven for not being overly sympathetic to what seems like millionaire landowners complaining about having to pay the same tax as other millionaires. The sight of TV multimillionaire Jeremy Clarkson marching to demand that he should be able to keep avoiding paying tax will have rankled with most people.

However, the situation is more complicated than it appears on the surface.

Most small family farms are passed on from generation to generation, passing on a livelihood as well as financial assets. If the sons and daughters of the farmer cannot afford the inheritance tax then the farm and its land will have to be sold off to other farmers, or more likely to agribusinesses or land speculators.

Reeves and the Treasury say only a small proportion of farmers will be affected by the change to the tax law, because there are exemptions.

But not all farms in the Treasury’s definition are working family farms. The Treasury includes thousands of farms that have been bought as small holdings or second homes often as investments – by what could be called ‘recreational farmers’, who don’t run a farm as their main source of income, but who are wealthy people who buy rural land for enjoyment rather than to earn a living. If they are excluded from the total, then the proportion of ‘real’ farmers who will be caught by this change in the law is far greater: 49% of working farms, according to BBC Verify.

Millionaire farmers?

But could it be argued that if they own farms worth more than £1 million then they are pretty well off and it’s just tough – working-class people have to pay high levels of tax, why not millionaire farmers?

The top 49% of farms do include large estates owned by the rich, but small farms can still be worth over £1 million. Small farmers are asset-rich but cash-poor – their land wealth is high but their incomes are not. The wealthier farmers represented by the National Farmers Union (NFU) have often understated the profits made by rich farmers and agribusiness. But many small farmers are operating on small margins, with a yield in earnings about the same as the average wage, unstable and insecure.

Agricultural land values have risen even faster than house prices in recent years, which has driven up the value of a small farm, without adding to its weekly income. Rich land speculators have bought up huge chunks of land as investments to avoid inheritance and other taxes, exploiting the loophole and rapidly forcing the price of land up.

People like Clarkson, who have openly admitted they have bought farms and land as a way of avoiding paying inheritance tax, are now whingeing that their tax loophole has been closed. According to the Financial Times: “Private and institutional investors and lifestyle buyers bought half the farms available in 2023, more than twice as much land as farmers.”

“There is a massive difference between me, earning less than 20k a year, and somebody who has made their money outside farming, retired to the country at 45, bought a farm for £5 million, has two horses, five sheep and a set of accounts that says they are a farmer,” said a Somerset farmer.

And these speculators are further exploiting tenant farmers by renting out the land at high prices, or avoiding taxes by outsourcing farming without tenancy agreements.

Land speculation

The crisis caused by land speculation has exacerbated the rest of the crisis in agriculture, reflecting the wider crisis of capitalism. Small farms find it very difficult to survive competing with the agribusinesses.

Farms that are viable economically vary in size according to the geography and type of farming. The NFU claims that an average farm is 217 acres – on average anything over 80 acres will incur the tax. And land values vary widely from cheaper hill land in Wales to more expensive arable land in east England.

Farmers are not one homogenous group. Most are small-business people, but with a huge variation in living standards. Arable farms tend to be richer than dairy or sheep farms, and there is a mix on most farms.

There are giant landowners and agribusinesses worth billions which operate several very big farms or many small ones. There are also tenant farmers who rent their farm and land from big landowners. Most farmers employ workers – agricultural labourers and skilled workers – in an industry that is notoriously low paid.

Small farm owners are a middle layer of society operating on small margins to make a living but also employing workers themselves. They are exploited by big business: sandwiched between banks, which charge high rates of interest to invest in new equipment and techniques to compete in the food market, and supermarkets and the food industry, which force down prices as low as they can get away with (not for the benefit of consumers but to boost their mega-profits). Small farmers are competing against the increasingly rapacious agribusinesses who can invest more cheaply and take advantage of economies of scale.

And farmers have also been affected by a fall in exports following Brexit, rising supply costs, and green measures to decarbonise agriculture that have not been compensated – like workers in polluting industries, they are expected to carry the cost of decarbonisation. The income of dairy farmers, for example, fell by 68% in the year to February. A bigger issue has already arisen in Wales and is likely to develop in England – agricultural subsidies being phased out. And like everyone else, farmers have been hit by the cost-of-living crisis.

The perceived threat from the changes in inheritance tax has acted as a focus for all the problems facing small farmers. Farmers are protesting these issues as much as the tax increases.

Clown Clarkson

The protests by farmers have included all layers. Many richer landowners have headed up the movement, but the main body of the protests is made up of small farmers who are already struggling. Land speculators like Clarkson and the big farmers are happy to mobilise the small farmers but have interests completely separate from them.

Closing the inheritance tax loophole for speculators has threatened some small farms but, unlike the family farmers, the rich can afford expensive accountants who will find new ways to avoid tax. As another Somerset farmer told the Financial Times: “They say they’re going after landed industrialists who employ people like me to farm their land. But they have already sewn it all up in offshore funds and trusts.”

There is no protection for tenant farmers and agricultural workers from being evicted if the speculators decide to sell off the land to avoid paying the inheritance tax.

Starmer’s Labour is governing in the interests of big business and is continuing austerity for the working class. Closing the land inheritance tax loophole used by millionaires to avoid paying tax merely equalises one of the lowest tax burdens on the wealthy in the western world.

The Labour government has avoided taxing the super-rich or the profits of corporations, like the energy companies that make hundreds of billions of pounds profit from high fuel bills. It showed its true colours towards the working class by cutting winter fuel payments for poor pensioners and refusing to lift the two-child benefit cap. It has no sympathy for small farmers either.

Socialists should support the legitimate concerns of small farmers and aim to win them away from the farming industry establishment and the NFU, dominated by big farmers and corporations, to the side of the working class. The trade unions representing agricultural workers should call for a Trades Union Congress-led inquiry into the effects of the tax, involving representatives of small farmers, tenant farmers, agricultural workers and trade unions in the food retail industry, and support a fight for those small farmers in genuine need for mitigation from the tax.

The Socialist Party calls for measures to protect the incomes of small farmers: the banking and finance industry should be nationalised and run under democratic working-class control, so that interest-free loans can be made to the small farmers. They should be encouraged to form voluntary cooperative organisations to share resources between farms and benefit from economies of scale.

The food corporations, agribusinesses, large landholding and supermarket chains should also be nationalised, with compensation only on the basis of proven need, and a plan drawn up by workers from those industries, independent farmers and trade unions to plan the industry.

Planning would also allow green measures, like some rewilding of farming land and the reduction in use of chemical fertilisers and pesticides, and movement away from intensive farming and towards soil conservation and animal welfare. Such measures would be drawn up by farmers, agricultural workers and working-class people in rural areas, and representatives of the wider working class, looking at society’s needs overall, including ensuring jobs and livelihoods are secure.